Fair Work Ombudsman v Specialised Linen Services (Sydney) Pty Ltd
[2023] FedCFamC2G 17
Federal Circuit and Family Court of Australia
(DIVISION 2)
Fair Work Ombudsman v Specialised Linen Services (Sydney) Pty Ltd [2023] FedCFamC2G 17
File number(s): MLG 3040 of 2021 Judgment of: DEPUTY CHIEF JUDGE MERCURI Date of judgment: 23 January 2023 Catchwords: INDUSTRIAL – FAIR WORK – parties by consent seek declaration of contraventions of the Fair Work Act 2009 (Cth) – failure to pay overtime, penalty rates, shift work loadings, annual leave loading and annual leave pursuant to the Dry Cleaning and Laundry Industry Award 2010 – where the parties agree on an appropriate amount for the penalty – consideration of the nature and seriousness of the contraventions over a four-month period, impact on the employees and need for general deterrence in laundry industry – balanced against the respondent’s lack of prior history of findings of contraventions, rectification of underpayments and steps taken to ensure that a similar situation does not arise in future – where the court is satisfied that the proposed penalty is appropriate – declaration of contraventions and penalty orders made. Legislation: Fair Work Act 2009 (Cth), ss 44, 45, 546, 557
Dry Cleaning and Laundry Industry Award 2010
Cases cited: Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482
Fair Work Ombudsman v WY Pty Ltd [2016] FCCA 3432
Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290
Kelly v Fitzpatrick [2007] FCA 1080
Mornington Inn Pty v Joran [2008] FCAFC 70
Division: Division 2 General Federal Law Number of paragraphs: 40 Date of last submission/s: 9 September 2022 Place: Melbourne – in chambers on the papers Solicitor for the Applicant: Fair Work Ombudsman Solicitor for the First to Fourth Respondents: PwC ORDERS
MLG 3040 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: SPECIALISED LINEN SERVICES (SYDNEY) PTY LTD (ACN 115 941 010)
First Respondent
SPECIALISED LINEN SERVICES (ADELAIDE) PTY LTD (ACN 610 545 974)
Second Respondent
SPECIALISED LINEN SERVICES (CAIRNS) PTY LTD (ACN 605 037 189) (and others named in the Schedule)
Third Respondent
order made by:
deputy chief JUDGE MERCURI
DATE OF ORDER:
23 January 2023
THE COURT DECLARES BY CONSENT THAT:
1.The First Respondent, Specialised Linen Services (Sydney) Pty Ltd, contravened:
(a)section 45 of the Fair Work Act 2009 (Cth) (‘FW Act’), by failing to pay Ritu Nigam, Weiying (Kelly) Qiu and Muna Shrestha, as employees who were not engaged to perform shiftwork, overtime as required by clause 22.1 of the Award;
(b)section 45 of the FW Act, by failing to pay Sharmila Garbuja and Renhua Li, as employees who were engaged to perform shiftwork, overtime as required by clause 22.1 of the Award;
(c)section 45 of the FW Act, by failing to pay Sharmila Garbuja, Muna Shrestha and Ritu Nigam penalty rates for working on a Sunday as required by clause 22.5(b) of the Award;
(d)section 45 of the FW Act, by failing to pay Sharmila Garbuja penalty rates for working on a public holiday as required by clause 22.5(c) of the Award;
(e)section 45 of the FW Act, by failing to pay Pabitra Bohara and Sharmila Garbuja a loading of 15% when they worked shiftwork, as required by clause 23.5 of the Award;
(f)section 45 of the FW Act, by failing to pay Weiying (Kelly) Qiu and Muna Shrestha, as employees not engaged to perform shiftwork, annual leave loading of 17.5% when they took annual leave, as required by clause 25.2 of the Award;
(g)section 44(1) of the FW Act, by failing to pay Weiying (Kelly) Qiu and Muna Shrestha at their base rate of pay when they took a period of annual leave, as required by section 90(1) of the FW Act.
2.The Second Respondent, Specialised Linen Services (Adelaide) Pty Ltd contravened:
(a)section 45 of the FW Act, by failing to pay Hetalben Patel, Dhom Riiny, Kandeepan Sevethiyar and Van Nei Per Tlaisun, as employees who were not engaged to perform shiftwork, overtime as required by clause 22.1 of the Award;
(b)section 45 of the FW Act, by failing to pay Dhom Riiny penalty rates for working on a Sunday as required by clause 22.5(b) of the Award;
(c)section 45 of the FW Act, by failing to pay Caitlin Luong penalty rates for working on a public holiday as required by clause 22.5(c) of the Award.
3.The Third Respondent, Specialised Linen Services (Cairns) Pty Ltd contravened:
(a)section 45 of the FW Act, by failing to pay Doniver Agustin, Sharon Bell, Eun-Hui Cho, Mary Jane Collado and Michael Dos Santos, as employees who were not engaged to perform shiftwork, overtime as required by clause 22.1 of the Award;
(b)section 45 of the FW Act, by failing to pay Takeru Osawa a penalty rate of double time until release from duty in circumstances where he resumed or continued work without 10 consecutive hours off duty between successive days or shifts, as required by clause 22.3 of the Award;
(c)section 45 of the FW Act, by failing to pay Aries Mateo penalty rates for working on a public holiday as required by clause 22.5(b) of the Award.
4.The Fourth Respondent, Specialised Linen Services (Melbourne) Pty Ltd, contravened:
(a)section 45 of the FW Act, by failing to pay Shalik Ram Basnet, Surya Dhakal and Rajesh Rajesh, as employees who were engaged to perform shiftwork, overtime as required by clause 22.1 of the Award;
(b)section 45 of the FW Act, by failing to pay Rajesh Rajesh penalty rates for working on a Saturday as required by clause 22.5(a) of the Award;
(c)section 45 of the FW Act, by failing to pay Shalik Ram Basnet penalty rates for working on a Sunday as required by clause 22.5(b) of the Award;
(d)section 45 of the FW Act, by failing to pay Shalik Ram Basnet, Zack Chew, Surya Dhakal and Rajesh Rajesh a loading of 15% when they worked shiftwork, as required by clause 23.5 of the Award.
THE COURT ORDERS BY CONSENT THAT:
5.Pursuant to section 546(1) of the FW Act:
(a)the First Respondent pay a total pecuniary penalty of $54,000 for committing the contraventions set out in order 1 above;
(b)the Second Respondent pay a total pecuniary penalty of $10,000 for committing the contraventions set out in order 2 above;
(c)the Third Respondent pay a total pecuniary penalty of $14,000 for committing the contraventions set out in order 3 above;
(d)the Fourth Respondent pay a total pecuniary penalty of $12,000 for committing the contraventions set out in order 4 above.
6.Pursuant to section 546(3)(a) of the FW Act, each of the First, Second, Third and Fourth Respondents are required to pay their respective penalty amounts to the Consolidated Revenue Fund of the Commonwealth within 28 days of the Court’s orders.
7.The applicant has liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
DEPUTY CHIEF JUDGE MERCURI:
Introduction
Before the court is an application brought by the applicant, the Fair Work Ombudsman (‘FWO’), in which it is alleged that the respondents have contravened various provisions of the Fair Work Act 2009 (Cth) (‘FW Act’).
In particular, it is alleged that the respondents have failed to pay overtime, penalty rates, shift work loadings, annual leave loading and annual leave to various employees pursuant to the Dry Cleaning and Laundry Industry Award 2010 (‘the Award’). The applicant seeks declaratory relief and the imposition of penalties for the alleged contraventions.
By their joint submissions on penalty, the parties agree that each of the respondents has contravened the Award and by consent they seek that the court make declarations and impose penalties. The parties join in seeking that penalties be imposed in the amount set out at paragraph 3 of their joint submissions.
Evidence
The parties have filed an agreed statement of facts[1] and joint outline of submissions.[2]
[1] Statement of Agreed Facts filed on 1 July 2022.
[2] Joint Outline of Submissions filed on 9 September 2022.
The parties jointly rely upon the following documents:
(a)Application filed on 26 November 2021 and the Amended Statement of Claim filed on 31 May 2022;
(b)Defence filed on 24 June 2022;
(c)Statement of Agreed Facts filed on 1 July 2022;
(d)Affidavit of Peta Williams affirmed on 8 September 2022; and
(e)Affidavit of Sarah Jane Rowley affirmed on 2 September 2022.
Background
By way of background, the respondents each operated commercial laundry businesses in New South Wales, South Australia, Queensland and Victoria.[3] The admitted contraventions occurred during the period from 1 to 31 January and 2 to 7 July 2018 and affected 22 employees who performed laundry work at Level 1 and Level 2 classifications under the Award.
[3] Statement of Agreed Facts filed on 1 July 2022 at paragraph [2].
The applicant commenced an investigation into the respondents in August 2018 into various nominated employees employed at the relevant time.[4] One of those employees was 17 years of age, the remainder of the employees were adults.[5] All of the employees at the relevant time was covered by the Award.[6] Some of the employees were employed on a full time basis, some on a part time basis and some on a casual basis.[7] There is no dispute between the parties as to the identification of the employees, their classification at the relevant time or the amount of the underpayment in respect of each of them.[8]
[4] Statement of Agreed Facts filed on 1 July 2022 at paragraph [6].
[5] Statement of Agreed Facts filed on 1 July 2022 at paragraph [11].
[6] Statement of Agreed Facts filed on 1 July 2022 at paragraph [14].
[7] Statement of Agreed Facts filed on 1 July 2022 at paragraph [15].
[8] See Statement of Agreed Facts filed on 1 July 2022 at Schedule 1.
During the course of the investigation, the applicant issued Notifications of Audit and Notices to Produce to the respondents in relation to their respective employees. In response, the respondents produced their records.[9]
[9] Statement of Agreed Facts filed on 1 July 2022 at paragraphs [7] and [8].
On 12 February 2020, Peta Williams, Fair Work Inspector, informed each of the respondents by letter that as a result of the investigations, she had found that the respondents had committed various contraventions of the Award during the assessment period (‘Contravention Letters’).[10]
[10] Statement of Agreed Facts filed on 1 July 2022 at paragraph [54].
In response to the Contravention Letters, on 28 February 2020, the respondent’s legal representatives wrote to the applicant advising that whilst not conceding all of the alleged contraventions, the respondents had paid the alleged underpayment amounts to the affected employees other than those who no longer worked for the respondents.[11] The respondents further advised that in relation to the former employees, the respondents were seeking their banking details in order to make rectification payments.
[11] Statement of Agreed Facts filed on 1 July 2022 at paragraph [61].
It is agreed that rectification payments were made for all but one employee.[12] It is also agreed that in relation to that employee, the respondents had not been able to contact him to make the necessary rectification payment, but further efforts were continuing in that regard.
[12] Affidavit of Ms Sarah Jane Rowley affirmed and filed on 2 September 2022 at paragraphs [14] to [16].
On 5 March 2020, the respondent’s legal representative wrote to the applicant regarding the steps taken by the respondents, and more generally SPL Holdings (Australia) Pty Ltd, since its acquisition by SPLG in or about September 2018 in relation to its human resources, hiring and capacity, enhanced time and attendance and payroll systems and the integration and review of historical payments.[13]
[13] Statement of Agreed Facts filed on 1 July 2022 at paragraph [62].
Penalty
In Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 (‘Cth v Director, FWBII’),[14] the High Court confirmed that a court is permitted to ‘receiving and, if appropriate, accepting an agreed or other civil penalty submission’.[15]
[14] [2015] HCA 482.
[15] Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482, 489 [1].
At paragraph [58], the plurality said:
… Subject to the court being sufficiently persuaded of the accuracy of the parties’ agreement as to facts and consequences, and that the penalty which the parties propose is an appropriate remedy in the circumstances thus revealed, it is consistent with principle and, … highly desirable in practice for the court to accept the parties’ proposal and therefore impose the proposed penalty. To do so is no different in principle or practice from approving an infant’s compromise, a custody or property compromise, a group proceeding settlement or a scheme of arrangement.
(emphasis in original)Also as noted by the plurality in Cth v Director, FWBII at paragraph [55], the primary purpose of civil penalties is to promote the public interest in compliance and to attempt to put a price on a contravention that is sufficiently high to deter repetition by the contravener and by others who are in a position to contravene legislation.
Having said that, it is nonetheless incumbent upon the court to satisfy itself that the proposed penalty is appropriate.
The relevant principles to which the court must have regard in assessing an appropriate penalty for a contravention of a civil remedy provision under the FW Act are well-settled. The maximum penalty for each contravention of sections 45 and 44(1) of the FW Act at the relevant time was $63,000 for a body corporate.
In addition, section 557(1) of the FW Act provides that two or more contraventions of a particular civil remedy provision will be treated as a single contravention where the contraventions were committed by the same person and arose out of the same course of conduct. The parties agree, and submit to the court that it is appropriate, that the respondents are entitled to the benefit of section 557(1) to group multiple contraventions of the same term of the Award or the same provision of the National Employment Standard (‘NES’) to the extent that the agreed contraventions occurred on multiple occasions and/or affected multiple employees.[16]
[16] Joint Outline of Submissions filed on 9 September 2022 at paragraph [16].
It is submitted for the parties that applying this approach, the number of contraventions for each of the respondents is:
(a)Seven for SPL Sydney,
(b)Three each for SPL Adelaide and SPL Cairns; and
(c)Four for SPL Melbourne.[17]
[17] Joint Outline of Submissions filed on 9 September 2022 at Annexure B.
It is well-settled that in determining whether, and if so, what penalty ought to be imposed in a particular matter, the court is required to have regard to a range of factors.[18] That list, whilst convenient, does not prescribe or limit the relevant matters to which a court must or may have regard.
[18] See, eg, Kelly v Fitzpatrick [2007] FCA 1080 at [14].
Nature, extent and circumstances of the contravening conduct
In the present matter, 22 employees were affected by the contravening conduct of the respondents during the relevant period. The underpayments relate to the failure to pay penalty rates, shift loadings and overtime, and in respect of two employees, the underpayment related to the failure to pay annual leave payments in accordance with the NES.
In addition, the affected employees were employed in the two lowest classifications under the award and in the case of one employee, was only 17 years of age. Employers have a particular responsibility in relation to vulnerable employees to ensure that their rights are respected.[19]
[19] Fair Work Ombudsman v WY Pty Ltd [2016] FCCA 3432 at [43].
Nature and extent of loss
It is common ground that during the relevant period, the underpayments amounted to a total of $24,134.05 and that individual employees were underpaid from $1.42 to $12,090.72.[20] These amounts, whilst not at the upper end of the spectrum when compared to claims that come before this court, are not insignificant. Not only do they only relate to a four month period, some of the underpayments were significant to the individuals concerned. For example, Ms Renhua Li was underpaid a total of over $12,000, which is not insignificant. The parties also submit that a higher penalty ought to be applied to SPL Sydney having regard to the significantly higher underpayment for that entity compared to the other respondent entities.[21]
[20] Statement of Agreed Facts filed on 1 July 2022 at Schedule 1.
[21] Joint Outline of Submissions filed on 9 September 2022 at paragraph [20].
It is also common ground that the underpayments were largely rectified by early March 2020, namely more than 12 months after the Assessed Employment Period.[22] Whilst regard is to be had to the rectification itself, it remains the case that the respondents had the benefit of money that ought to have been paid to its employees for a significant period of time. The ultimate rectification itself, relatively prompt as it was, does not displace the loss suffered by the employees who did not have access to their wages and other employment entitlements in a timely manner.
[22] Joint Outline of Submissions filed on 9 September 2022 at paragraph [21].
Size and financial resources of the business
The parties acknowledge that the size and financial resources of a respondent does not in any way justify non-compliance with workplace laws.[23] It is common ground that a penalty should be imposed at a meaningful level regardless of the employer’s size or financial position.
[23] Joint Outline of Submissions filed on 9 September 2022 at paragraph [22].
The parties concede that the respondents are able to meet the proposed penalties.[24]
[24] Joint Outline of Submissions filed on 9 September 2022 at paragraph [23].
Prior conduct
It is submitted by agreement that the respondents have not been subject to a prior finding of non-compliance by a court.[25]
[25] Joint Outline of Submissions filed on 9 September 2022 at paragraph [24].
Contrition, co-operation and corrective action
The respondents’ response to the investigation undertaken by the applicant and the steps taken to immediately rectify the alleged underpayments, prior to the commencement of these proceedings, is evidence of the respondents’ contrition and co-operation with the regulator.[26] In addition, the respondents admitted the contraventions at an early stage and facilitated these proceedings progressing to a penalty hearing without the need for the applicant to expend further costs in conducting a contested liability and penalty hearing.
[26] Joint Outline of Submissions filed on 9 September 2022 at paragraph [26].
The respondents have also taken action to improve their human resources capabilities and to provide better information to employees to ensure that employees are aware of their rights.[27]
[27] Joint Outline of Submissions filed on 9 September 2022 at paragraph [27].
It is conceded that not all situations in which admissions of contraventions are made will result in a discount on penalty. The parties submit that the facts in this case fall within the circumstances identified in Mornington Inn Pty v Joran,[28] where in discussing whether there ought to be a discount in fixing a penalty where a party, by their conduct, avoids the need for a contested hearing, Stone and Buchanan JJ noted:
74.It is important to note that it is not a sufficient basis for a discount that the plea has saved the cost of a contested hearing – that would discriminate against a person who exercised the right to contest the allegations. A discount may be justified, however, if the plea is properly to be seen as willingness to facilitate the course of justice. Remorse and an acceptance of responsibility also merit consideration where they are shown.
…
76.… the rationale for providing a discount for an early plea of guilty in a criminal case does not apply neatly to a case, such as the present, where a civil penalty is sought and the case proceeds on pleadings. Nevertheless, in our view, it should be accepted, for the same reasons as given in Cameron, that a discount should not be available simply because the respondent has spared the community the cost of a contested trial. Rather, the benefit of such a discount should be reserved for cases where it can be fairly said that an admission of liability: (a) has indicated an acceptance of wrongdoing and a suitable and credible expression of regret; and/or (b) has indicated a willingness to facilitate the course of justice.
[28] [2008] FCAFC 70.
I agree with the submissions made that this is a case in which the respondent’s actions in the defence of this claim reflect remorse and indicate a willingness to facilitate the course of justice. The respondents rectified their non-compliance at an early stage, made admissions and progressed the matter to penalty hearing without putting the applicant to the significant costs and time of a contested hearing. In these circumstances, it is appropriate for a discount in the sum of 25% to be applied.
Deterrence
It is well-settled that in setting penalties, the court must have regard to setting a penalty at a level which will achieve a level of both general and specific deterrence.
Whilst there is a need for specific deterrence in circumstances where the respondents continue to operate in the laundry business, the need for specific deterrence is tempered in this case having regard to the fact that the respondents have sought to rectify the underpayments promptly when they were brought to their attention, that there was a change of ownership at or about the time of the investigation with SPLG acquiring ownership of the business on or about 27 September 2018 and that after that change in ownership, the respondents have taken various steps discussed at paragraph [29] above which are aimed at avoiding a similar situation occurring again in the future.[29]
[29] Joint Outline of Submissions filed on 9 September 2022 at paragraph [31].
In terms of general deterrence, it is well-settled that penalties must be set at a level so as not to simply be seen as the ‘cost of doing business’ by other employers.[30]
[30] Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290 at [27].
The parties submit and the court agrees that general deterrence is relevant in this matter. This is particularly so having regard to the fact that during the period from July 2018 to June 2022 the FWO processed 189 requests for assistance from employees in the laundry industry recovering an average of over $3,500 per employee.[31]
[31] Joint Outline of Submissions filed on 9 September 2022 at paragraph [33].
Recommendation as to penalty
Having regard to each of these factors, the parties submit to the court that it is appropriate for the court to impose penalties in the following amounts on each of the respondents:
(a)$54,000 for SPL Sydney which amounts to 12.4% of the maximum;
(b)$10,000 for SPL Adelaide, which is 5.29% of the maximum;
(c)$14,000 for SPL Cairns, which is 7.41% of the maximum; and
(d)$12,000 for SPL Melbourne which is 4.76% of the maximum.[32]
[32] Joint Outline of Submissions filed on 9 September 2022 at paragraph [34].
It is submitted that penalties in these amounts reflect the low to mid-range for individual contraventions and reflect a reduction on totality to reflect the lessened need for specific deterrence in this case.[33]
[33] Joint Outline of Submissions filed on 9 September 2022 at paragraph [35].
I am satisfied that based on the agreed facts, these penalties are indeed appropriate in all of the circumstances.
I also agree that the declarations sought by the parties are appropriate having regard to the agreed facts. The making of declarations in the terms sought serve the interests of justice in this case. They reflect the court’s disapproval of the contravening conduct and vindicate the applicant’s claim that the respondents contravened the Award and the NES. The making of the declarations in the terms sought will also assist the applicant in undertaking its duties in the future and can serve as a deterrent to others.
Conclusion
For each of these reasons, I make the declarations and orders in the terms sought by the parties and set out at the commencement of these reasons.
I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment of Deputy Chief Judge Mercuri. Deputy Associate:
Dated: 23 January 2023
SCHEDULE OF PARTIES
MLG 3040 of 2021 Respondents
Fourth Respondent:
SPECIALISED LINEN SERVICES (MELBOURNE) PTY LTD (ACN 096 726 760)
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