Fair Work Ombudsman v Statewide Security (WA) Pty Ltd
[2022] FedCFamC2G 194
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Statewide Security (WA) Pty Ltd [2022] FedCFamC2G 194
File number: PEG 86 of 2021 Judgment of: JUDGE LADHAMS Date of judgment: 22 March 2022 Catchwords: INDUSTRIAL LAW – penalty hearing – penalty to be imposed for breaches of ss 712(3) and 716(5) of Fair Work Act 2009 Legislation: Crimes Act 1914 (Cth) s 4AA
Fair Work Act 2009 (Cth) ss 12, 539, 546, 550, 557, 712, 716, 717
Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157; [2018] HCA 3
Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; [2008] FCAFC 8
Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; [2015] HCA 46
Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128
Fair Work Ombudsman v Deborah Ruth Souris [2016] FCCA 345
Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301
Fair Work Ombudsman v Soma Kitchens Pty Ltd (No 2) [2020] FCCA 2583
Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080
Markarian v R (2005) 228 CLR 357; [2005] HCA 25
Morning Inn Pty Ltd v Jordan (2008) 168 FCR 383; [2008] FCAFC 70
Division: Division 2 General Federal Law Number of paragraphs: 73 Date of hearing: 28 February 2022 Place: Perth Counsel for the Applicant: Ms Emma Luck Solicitor for the Applicant: Australian Government Solicitor Respondents: No appearance by or for the Respondents ORDERS
PEG 86 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: STATEWIDE SECURITY (WA) PTY LTD
First Respondent
RICHARD MICHAEL CLAYTON
Second Respondent
ORDER MADE BY:
JUDGE LADHAMS
DATE OF ORDER:
22 MARCH 2022
THE COURT ORDERS THAT:
1.Pursuant to s 546(1) of the Fair Work Act 2009 (Cth) (Fair Work Act):
(a)the first respondent pay a pecuniary penalty of $61,500 for its contraventions of ss 712(3) and 716(5) of the Fair Work Act as declared at A and B of the Order made on 11 August 2021; and
(b)the second respondent pay a pecuniary penalty of $12,500 for his involvement in the contraventions of the first respondent of ss 712(3) and 716(5) of the Fair Work Act as declared at C, D, E and F of the Order made on 11 August 2021.
2.Pursuant to s 546(3)(a) of the Fair Work Act, the pecuniary penalties ordered to be paid by the respondents in order 1 above be paid to the Commonwealth of Australia within 28 days of this Order.
3.The applicant have 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
JUDGE LADHAMS:
INTRODUCTION
On 30 April 2021 the applicant commenced proceedings before the Court alleging that the first respondent:
(a)contravened s 716(5) of the Fair Work Act 2009 (Cth) (Fair Work Act) by failing to comply with three compliance notices issued under s 716(2) of the Fair Work Act; and
(b)contravened s 712(3) of the Fair Work Act by failing to comply with a notice to produce documents issued under s 712(1) of the Fair Work Act.
The applicant alleged that the second respondent, who is the sole director and secretary of the first respondent and was at all material times responsible for the overall operation and control of the first respondent, was involved, within the meaning of s 550(2) of the Fair Work Act, in the contraventions.
On 11 August 2021 Judge Kendall entered default judgment against the respondents and made declarations that the first respondent had contravened ss 716(5) and 712(3) of the Fair Work Act and that the second respondent was involved, within the meaning of s 550(2) of the Fair Work Act, in those contraventions. His Honour made various orders, and listed the matter for a separate hearing in relation to penalty.
The matter was listed before me for a hearing in relation to penalty on 28 February 2022. These reasons address the penalty to be imposed on the respondents by reasons of the contraventions to the Fair Work Act, the subject of the declarations of Judge Kendall’s Order of 11 August 2021.
BACKGROUND AND PROCEDURAL HISTORY
Background facts leading to the commencement of this proceeding
The first respondent is a registered Australian proprietary company that operates a security business and provides security guard services to various companies and facilities. The second respondent is the sole director and secretary of the first respondent.
In or around August 2019 a Fair Work Inspector (inspector) commenced an investigation into the first respondent’s compliance with Commonwealth workplace laws.
Notice to Produce
On 31 January 2020 the inspector issued to the first respondent a written notice to produce records or documents pursuant to s 712 of the Fair Work Act (notice to produce). The notice to produce required the first respondent to produce specified documents relating to the employment of two former employees, Ms Mertens and Mr Jones, by 4.00pm on 19 February 2020. On 1 February 2020 the second respondent and Mr Addyman, the operations manager of the first respondent, sent emails to the inspector indicting that the second respondent was overseas and requesting further time to respond to the notice to produce. On 4 February 2020 the inspector indicated that he could not extend the production date indicated in the notice to produce.
On 26 February 2020 the second respondent provided to the inspector payslips relating to Ms Mertens and Mr Jones.
On 13 March 2020 the inspector sent a letter to the first respondent, a copy of which was provided to the second respondent by email, titled ‘Failure to Comply with Notice to Produce Records or Documents’. The letter advised that the first respondent had failed to produce the records or documents required by the notice by the production date.
Between 16 March 2020 and 22 March 2020 the second respondent and Mr Addyman provided further documents and information to the inspector. These documents and information comprised some, but not all, of the documents specified in the notice to produce.
Compliance notices
The Security Services Industry Award 2010 (Award) covered and applied to the first respondent in respect of its employment of Ms Mertens, Mr Jones and Mr Vuong.
As a result of the investigation, the inspector formed a reasonable belief that the first respondent had contravened the Award and the Fair Work Act:
(a)during the period from 18 November 2018 to 7 September 2019, by failing to pay Ms Mertens minimum rates, overtime rates, penalty rates for work performed on weekends, public holidays and late nights as well as payment of accrued but untaken annual leave on termination of employment;
(b)during the period from 22 August 2018 to 5 November 2019, by failing to pay Mr Jones casual loading, overtime rates and penalty rates for work performed on weekends, public holidays and late nights; and
(c)during the period from 1 May 2018 to 2 January 2019, by failing to pay Mr Vuong minimum rates, overtime rates, payment for absence on a public holiday and payment for accrued but untaken leave on termination of employment.
On 11 May 2020 the inspector issued three compliance notices to the first respondent. The compliance notices were issued in accordance with s 716 of the Fair Work Act. One of these compliance notices related to the contraventions of the Fair Work Act and Award in respect of Ms Merton’s employment (Mertens compliance notice), one related to the contraventions in respect of Mr Jones’ employment (Jones compliance notice) and one related to the contraventions in relation to Mr Vuong’s employment (Vuong compliance notice). Each of the compliance notices required the first respondent, by 15 June 2020, to take actions specified in the notice to remedy the direct effects of the contraventions identified in the compliance notice, and to produce evidence of compliance with the notice to the applicant by 22 June 2020.
On 14 June 2020 the second respondent sent an email to the inspector attaching some attempted calculations in response to the Mertens compliance notice and requesting a 14 day extension of time to comply with the compliance notices. On 15 June 2020 the inspector sent an email to the second respondent indicating that he was unable to provide an extension of time to the date set out in the compliance notices. Also on 15 June 2020 the second respondent indicated to the inspector that he intended to enter a payment plan upon completion of the calculations.
On 13 July 2020 the inspector issued a letter to the first respondent titled ‘Failure to Comply with Compliance Notice’ and emailed a copy of this letter to the second respondent. The letter indicated that the first respondent had failed to take the required actions set out in the compliance notices and to produce to the applicant the required reasonable evidence of compliance.
The inspector provided evidence to the Court that in November 2021 Ms Mertens, Mr Jones and Mr Vuong all advised him that they had not received payments from the first respondent following the investigation.
PROCEEDINGS BEFORE THE COURT
The applicant commenced proceedings in the Court on 30 April 2021 by way of an application accompanied by a statement of claim.
The respondents have not filed a notice of appearance in this matter and do not appear to have taken any steps to defend the matter.
On 29 July 2021 the applicant filed an application in a case seeking default judgment. The application in a case came before the Court on 11 August 2021 and on that day Judge Kendall made the following declarations:
A.the First Respondent contravened s 716(5) of the Fair Work Act 2009 (Cth) (the “FW Act”) by:
i)failing to comply with the compliance notice dated 11 May 2020 (the “Mertens Compliance Notice”);
ii) failing to comply with the compliance notice dated 11 May 2020 (the “Jones Compliance Notice”);
iii) failing to comply with the compliance notice dated 11 May 2020 (the “Vuong Compliance Notice”);
B the First Respondent contravened s 712(3) of the FW Act by failing to comply with the notice to produce dated 31 January 2020 (the “Notice to Produce”);
C the Second Respondent was involved, within the meaning of s 550(2) of FW Act, in the contravention by the First Respondent of s 716(5) of the FW Act in respect of the Mertens Compliance Notice;
D the Second Respondent was involved, within the meaning of s 550(2) of FW Act, in the contravention by the First Respondent of s 716(5) of the FW Act in respect of the Jones Compliance Notice;
E the Second Respondent was involved, within the meaning of s 550(2) of FW Act, in the contravention by the First Respondent of s 716(5) of the FW Act in respect of the Vuong Compliance Notice; and
F the Second Respondent was involved, within the meaning of s 550(2) of FW Act, in the contravention by the First Respondent of s 712(3) of the FW Act in respect of the Notice to Produce.
Judge Kendall made various orders, including listing the matter for hearing in relation to penalty and making orders requiring the parties to file any affidavit evidence and outlines of submissions in relation to penalty.
The applicant filed an outline of submissions and an affidavit of Christopher Thomas Barlow on 22 December 2021, in compliance with the Order made by Judge Kendall.
In those submissions, the applicant sought the following orders in relation to penalty:
(a) pursuant to section 546(1) of the FW Act:
(i)the First Respondent pay a pecuniary penalty of $61,500 for its contraventions of sections 712(3) and 716(5) of the FW Act as declared at A. and B. of the Court’s orders dated 11 August 2021;
(ii)the Second Respondent pay a pecuniary penalty of $12,500 for his involvement in the contraventions of the First Respondent of sections 712(3) and 716(5) of the FW Act as declared at C., D., E. and F. of the Court’s orders dated 11 August 2021;
(b)pursuant to section 546(3)(a) of the FW Act, the pecuniary penalties ordered to be paid by the Respondents in [the order] above be paid to the Commonwealth of Australia within 28 days of the order;
(c)the Applicant have liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
The respondents have not filed any documents, and did not at any stage of this proceeding enter an appearance.
The matter came before me for penalty hearing on 28 February 2022. The applicant was represented by Ms Emma Luck and there was no appearance by or for the respondents.
In an affidavit filed on behalf of the applicant on 25 February 2022, Ms Sara Anicic deposed to steps taken on behalf of the applicant to serve on the respondents the Order made by Judge Kendall on 11 August 2021, the evidence and submissions filed on behalf of the applicant and the steps taken on behalf of the applicant to advise the respondents of the hearing date.
I am satisfied that the respondents were properly notified of the Order made by Judge Kendall and the hearing listed on 28 February 2022 and that they were served a copy of the applicant’s evidence and submissions. I considered that it was appropriate to proceed with the hearing on penalty in the absence of the respondents.
CONSIDERATION
Section 546(1) of the Fair Work Act gives the Court a discretion to order a person to pay a pecuniary penalty if it is satisfied that person has contravened a civil remedy provision. Sections 712(3) and 716(5) of the Fair Work Act are civil remedy provisions. The Court has already declared, in the Order made by Judge Kendall on 11 August 2021, that the first respondent contravened ss 712(3) and 716(5) of the Fair Work Act and that the second respondent was involved in that contravention. I am satisfied that an order for the respondents to pay a pecuniary penalty is appropriate.
The purpose of a civil pecuniary penalty was explained by the plurality (French CJ, Kiefel, Bell Gordon and Nettle JJ) in the High Court’s decision in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; [2015] HCA 46, where their Honours said at [55] (footnotes omitted):
No less importantly, whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, is primarily if not wholly protective in promoting the public interest in compliance:
Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act]. … The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.
The greater the penalty that is imposed on the contravener, the more likely the contravener will be deterred from further contravention of the Fair Work Act and will seek to avoid the risk of subjection to further penalties: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157; [2018] HCA 3 at [116].
Approach for imposing civil penalties
Justice Bromwich in the Federal Court decision of Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301 (NSH North) outlined the approach that should be taken when determining the appropriate penalty. His Honour outlined the following steps at [36]:
(1) Identify the separate contraventions, with each breach of each obligation being a separate contravention, and each breach of a term of the Award being a separate contravention.
(2) Consider whether each separate contravention should be dealt with independently or with some degree of aggregation for those contraventions arising out of a course of conduct, noting that s 557 of the FW Act provides that two or more contraventions of a given civil remedy provision are to be taken to be a single contravention if committed by the same person and arising out of a course of conduct by that person.
(3) Consider whether there should be further adjustment to ensure that, to the extent of any overlap between groups of separate aggregated contraventions, there is no double penalty imposed, and that the penalty is an appropriate response to what each respondent did.
(4) Consider the appropriate penalty in respect of each final individual group of contraventions, taken in isolation.
(5) Consider the overall penalties arrived at, including by reference to those which may be proposed by the FWO (as permitted by Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 (CFMEU Civil Penalties Case) at [64]) and what is proposed by the respondents, and apply the totality principle, to ensure that the penalties for each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary: see Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [23]. [71] and [102].
Identification of contraventions
In accordance with the Court’s declaration on 11 August 2021, there have been three contraventions of s 716(5) and one contravention of s 712(3) of the Fair Work Act by the respondents.
Pursuant to s 712(1), an inspector may require a person, by notice, to produce a record or document to the inspector. The civil penalty provision in s 712(3) of the Fair Work Act provides that a person who is served with a notice to produce must not fail to comply with the notice.
An inspector has the power to issue a compliance notice under s 716 of the Fair Work Act. Section 716 relevantly provides:
Section 716 – Compliance notices
Application of this section
(1)This section applies if an inspector reasonably believes that a person has contravened one or more of the following:
(a) a provision of the National Employment Standards;
(b) a term of a modern award;
(c) a term of an enterprise agreement;
(d) a term of a workplace determination;
(e) a term of a national minimum wage order;
(f) a term of an equal remuneration order;
(g) a provision of Part 6-4C (which deals with the Coronavirus economic response);
(h) a jobkeeper enabling direction (within the meaning of Part 6-4C);
(i) a provision of an agreement authorised by Part 6-4C.
Giving a notice
(2)The inspector may, except as provided by subsection (4), give the person a notice requiring the person to do either or both of the following within such reasonable time as is specified in the notice:
(a)take specified action to remedy the direct effects of the contravention referred to in subsection (1);
(b)produce reasonable evidence of the person's compliance with the notice.
…
(5) A person must not fail to comply with a notice given under this section.
Note: This subsection is a civil remedy provision (see Part 4-1).
Whether contraventions should be considered independently or in aggregation
I accept the applicant’s submission that each of the respondents’ contraventions of the Fair Work Act should be considered independently. There is only one breach of s 712(3) of the Fair Work Act. There are three breaches of s 716(5), but this is not a provision identified in s 557 of the Fair Work Act in relation to which two or more contraventions are taken to constitute a single contravention if they are committed by the same person and arise out of the same course of conduct by that person.
I also accept the applicant’s submission that no further grouping should be applied as each contravention relates to different obligations of the first respondent arising under different notices.
Appropriate penalty for each contravention
It is appropriate to determine an appropriate level of penalty for each contravention, and then look at the aggregate of those penalties in the light of the overall conduct of the respondents, to form a view as to whether the aggregate amount was out of proportion to the overall conduct: Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; [2008] FCAFC 8 (McAlary-Smith) at [23].
Maximum penalty
In determining the appropriate penalty, I take into consideration the maximum penalty. When considered with other factors, this amount can be seen as a yardstick to determine the appropriate penalty: Morning Inn Pty Ltd v Jordan (2008) 168 FCR 383; [2008] FCAFC 70 at [18], [88]; Markarian v R (2005) 228 CLR 357; [2005] HCA 25 at [31].
The maximum penalty units that can be imposed on individuals for contraventions of ss 712(3) and 716(5) are set out in s 539 of the Fair Work Act. The maximum penalty that the Court can impose for a contravention of s 716(5) is 30 penalty units and the maximum penalty that the Court can impose for each contravention of s 712(3) is 60 penalty units. The maximum penalty units that can be imposed on a body corporate is five times the maximum number of penalty units that can be imposed on an individual: s 546(2)(b) of the Fair Work Act.
‘Penalty unit’ has the meaning given by s 4AA of the Crimes Act 1914 (Cth) (see s 12 of the Fair Work Act). At the time of the contraventions, a penalty unit was $210.
This means that the maximum penalty that the Court can impose is this matter is:
(a)for each contravention of s 716(5) of the Fair Work Act, $31,500 against the first respondent and $6,300 against the second respondent; and.
(b)for the contravention of s 712(3) of the Fair Work Act, $63,000 against the first respondent and $12,600 against the second respondent.
Other factors relevant to penalty
In Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 (Kelly v Fitzpatrick) at [14], the Federal Court identified that the following factors can potentially be relevant to determining penalty:
•the nature and extent of the conduct which led to the breaches;
•the circumstances in which that conduct took place;
•the nature and extent of any loss or damage sustained as a result of the breaches;
•whether there had been similar previous conduct by the respondent;
•whether the breaches were properly distinct or arose out of the one course of conduct;
•the size of the business enterprise involved;
•whether or not the breaches were deliberate;
•whether senior management was involved in the breaches;
•whether the party committing the breach had exhibited contrition;
•whether the party committing the breach had taken corrective action;
•whether the party committing the breach had cooperated with the enforcement authorities;
•the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
•the need for specific and general deterrence.
This is not a checklist of factors to be considered. In determining the appropriate penalty amounts for each of the respondents’ contraventions of the Fair Work Act, the Court’s task it to ‘fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations’: McAlary-Smith at [91].
The applicant submitted, and I accept, that the following factors are relevant to determining the appropriate penalty in the present case.
General deterrence
The applicant submitted, and I agree, that general deterrence is needed to send a message to employers generally and to the security services industry in particular that a failure to comply with a compliance notice and notice to produce will not be tolerated by the applicant, the community and the courts. As the Federal Circuit Court (Judge O’Sullivan) said in Fair Work Ombudsman v Deborah Ruth Souris [2016] FCCA 345 at [48]:
The failure to comply with the notices properly issued by the applicant in the course of its investigations and the discharge of its statutory functions is serious. Recipients of such notices should be left under no misapprehension about their obligations to comply with those notices.
The applicant provided to the Court a report titled ‘Fair Work Ombudsman Industry profile and FWO Interactions: Investigation and Security Services’ for the period July 2018 to June 2021 (FWO report). The applicant relied on the FWO report in support of submissions on the need for general deterrence in this matter. In written submissions, the applicant submitted that there is a need for general deterrence in the security services industry, noting that the FWO report indicates that 10% of contraventions by employers in the security services industry relate to an underpayment of hourly rates, and 8% relate to annual leave contraventions. In oral submissions, Ms Luck referred to information in the FWO report to indicate that the industry dispute rate is high.
In NSH North at [134], the Federal Court considered that a report of this nature was relevant and could be given appropriate weight insofar as it establishes that there are problems in the relevant industry which render general deterrence of substantial and considering importance in fixing civil penalties. While I take the FWO report into account, I do not give it any significant weight in relation to general deterrence. The penalty in the present matter is to be imposed in relation to the failure to comply with the compliance notices and the notice to produce and there is little in the FWO report to indicate whether failure to comply with statutory notices is a significant problem in the investigation and security services industry: see also Fair Work Ombudsman v Soma Kitchens Pty Ltd (No 2) [2020] FCCA 2583 at [38], [57].
Nevertheless, general deterrence is an important consideration in this matter and the penalty needs to be sufficiently high to emphasise the impact and consequences of failing to comply with a compliance notice and notice to produce. The important work done by inspectors would be undermined by any perception that compliance with statutory notices is not mandatory.
Specific deterrence
As the Federal Court (Gilmour J) explained in Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128 at [50], specific deterrence is directed to ensuring that the respondents are not prepared to embark on the risk of engaging in the same contravening conduct in the future.
The need for specific deterrence in the present case is high. The first respondent remains a registered corporation and the second respondent continues to be the director and secretary of the first respondent. The applicant submitted, and I accept, that the respondents’ continuing non-compliance with the notices significantly increases the objective seriousness of the contraventions.
I agree with the applicant’s submission that a meaningful penalty from the Court is required to demonstrate to the respondents that this conduct is not acceptable and will not be tolerated in the future.
Nature, extent and circumstances of the conduct
In relation to the notice to produce, the applicant submitted that inspectors must be able to exercise their compliance powers effectively in order to fulfil one of the principal objectives of the Fair Work Act to ensure a guaranteed safety net of fair, relevant and enforceable minimal terms and conditions for all employees.
The respondents did not produce any documents within the time specified in the notice to produce. The notice to produce required the production of six categories of documents relating to Ms Mertens and Mr Jones, which can be summarised as:
(1)records and documents containing basic information about the employment including commencement date, classification level, duties to be performed and whether the employee was full-time, part-time or casual;
(2)records or documents relating to the terms of engagement of the employees;
(3)records and documents recording the payment of wages to each of the employees;
(4)records and documents showing details of all hours worked by each employee;
(5)records or documents relating to the termination of employment of each employee; and
(6)records and documents relating to the annual leave entitlements of each employee.
One week after the production date set out in the notice to produce, the respondents provided payslips. This comprised part of the information required in relation to only one of the six categories of document.
Following the issue of the letter titled ‘Failure to Comply with a Notice to Produce Records or Documents’, the respondents did provide some further documents and information. However, the production of documents was not complete. The inspector identified in his affidavit that examples of documents that were required to be, but were not, produced include ‘records relating to the terms of engagement of the employees including copies of letters of offers, employment agreements, or records that show or detail all hours worked by each of the employees including the start and finish times and the dates worked, the locations worked at on any day, timesheets or attendance records and rosters’.
I acknowledge and take into account that there has been some production of documents, albeit late and incomplete.
In relation to the compliance notices, aside from an attempt to provide some calculations in response to the Mertens compliance notice, there is no evidence before the Court to show that the respondents took any steps to comply with the compliance notices. The applicant submitted to the Court that, to the best of the applicant’s knowledge, the respondents have not made any application for review of the three compliance notices under s 717 of the Fair Work Act.
In considering the circumstances of the conduct, I also take into account that compliance with the compliance notices would have been an efficient and cost-effective way for the respondents to rectify the underlying contraventions of the Fair Work Act and Award.
Nature and extent of loss
The applicant submitted that the three employees who were subject to the compliance notices have been denied their entitlements as a result of the contraventions of the Award and the Fair Work Act, as identified in the compliance notices. The first respondent had the benefit of the wages that are owed to the three employees over a period of 16 months. The applicant submitted that this is not insignificant in circumstances where each compliance notice identified between 5 to 11 separate contraventions of the Award and the Fair Work Act over a period between 8 to 14 months.
I accept this submission. I also accept the applicant’s submission that, as a result of the non-compliance, the applicant has spent time and public funds progressing this matter in Court. This would have been unnecessary had the respondents complied with the compliance notices.
Deliberateness
The applicant submitted that the respondents’ conduct is deliberate because the respondents were aware of the notice to produce and the compliance notices and what they were required to do in order to comply with each of these. The applicant acknowledged that the respondents made an attempt to calculate the entitlements in relation to the Mertens compliance notice and that the second respondent indicated that payments would be made by payment plan. The applicant submitted, however, that no calculations were provided by the respondents in relation to the Jones compliance notice and the Vuong compliance notice and that no payments have been made to any of these employees.
I accept the applicant’s submissions. I would also acknowledge that the respondents made some effort to produce documents specified in the notice to produce, albeit those documents were provided late and did not comprise all records and documents that the first respondent was required to produce in accordance with the notice to produce. The respondents have not provided any evidence to the Court to explain why they have not complied with the compliance notices or the notice to produce. I acknowledge that, when requesting an extension of time to comply with the compliance notices, the second respondent indicated that he had a health issue. However, I place at minimal weight on this as there is no medical evidence to support any assertion that the second respondent’s medical issue impacted his or the first respondent’s ability to comply with the notices, and, notwithstanding that the second respondent indicated an intention to engage a professional accountant to assist in providing the required information under the compliance notices, the respondents still had not complied with the notices at the time of the inspector’s affidavit some 18 months later. I can only infer that the continued non-compliance is deliberate.
Lack of contrition, corrective action and cooperation
There is no evidence before the Court to show that the respondents have taken any corrective action, shown any contrition or cooperated with the applicant in this proceeding. The respondents have not participated in this proceeding at all. The affidavit of the inspector confirms that, as at November 2021, the first respondent had not paid to the three employees their entitlements, which ought to have been calculated in accordance with the compliance notices.
Based on the evidence before the Court, the cooperation of the respondents in this matter is limited to the late and incomplete production of documents required by the notice to produce and the attempted calculations following the receipt of the Mertens compliance notice.
The lack of action taken by the respondents to comply with the requirements of the notices, in particular the compliance notices, and to pay the employees the amounts to which they are entitled demonstrates a lack of contrition.
I agree with the applicant’s submission that there should be no discount on penalty in this matter for cooperation, contrition or corrective action.
Involvement by senior management in the contraventions by the first respondent
The applicant submitted, and I accept, that at all material times the second respondent was the directing well and mind of the first respondent. He had knowledge of the notices and did not take sufficient steps to ensure the first respondent complied with the notices.
Assessment of penalty and totality
Where there are multiple breaches of civil penalty provisions, the totality principle should be considered to ensure that the imposition of a civil pecuniary penalty on the respondents is not oppressive or crushing: Kelly v Fitzpatrick at [30]. The imposition of the overall penalty should be just and appropriate: McAlary-Smith at [23]-[25], [67]-[71].
The applicant provided the following table setting out the penalty that it recommends in relation to each of the contraventions, and a discount that should be imposed taking into account the totality of the penalty:
Contravention of the FW Act
Maximum
penalty
Penalty
percentage
Penalty
amount
First Respondent Section 716(5): failure to comply with the Mertens Compliance Notice
$31,500.00
50%
$15,750.00
Section 716(5): failure to comply with the Jones Compliance Notice
$31,500.00
50%
$15,750.00
Section 716(5): failure to comply with the Vuong Compliance Notice
$31,500.00
45%
$14,175.00
Section 712(3): failure to comply with the Notice to Produce
$63,000.00
50%
$31,500.00
Total $157,500.00 - $77,175 Total on totality $61,500
Second Respondent Sections 716(5) and 550: involvement in the failure to comply with the Mertens Compliance Notice
$6,300.00
50%
$3,150.00
Sections 716(5) and 550: involvement in the failure to comply with the Jones Compliance Notice
$6,300.00
50%
$3,150.00
Sections 716(5) and 550: involvement in the failure to comply with the Vuong Compliance Notice
$6,300.00
45%
$2,835.00
Sections 712(3) and 550: involvement in the failure to comply with the Notice to Produce
$12,600.00
50%
$6,300.00
Total $31,500.00 - $15,435.00 Total on totality $12,500
Taking into account all of the above factors, I agree that a mid-range penalty is appropriate. I agree that this should be 50% of the maximum penalty sought for the contravention of s 712(3) and the contraventions of s 716(5) in respect of the Mertens compliance notice and Jones compliance notice and 45% for the contravention of s 716(5) in respect of the Vuong compliance notice. I also agree that the proposed deduction taking into account principles of totality is appropriate.
The respondents have not submitted any evidence relating to their ability or inability to pay the penalty sought by the applicant, and I am therefore unable to assess whether the penalty is manifestly excessive taking into account the particular circumstances of each of the respondents.
The first respondent should pay a total penalty of $61,500 in relation to the contraventions of ss 716(5) and 712(3) and the second respondent should pay a total penalty of $12,500.
Those penalties shall be payable to the Commonwealth.
CONCLUSION
For the reasons given, I make the following orders:
1. Pursuant to s 546(1) of the Fair Work Act 2009 (Cth) (Fair Work Act):
(a)the first respondent pay a pecuniary penalty of $61,500 for its contraventions of ss 712(3) and 716(5) of the Fair Work Act as declared at A and B of the Order made on 11 August 2021; and
(b)the second respondent pay a pecuniary penalty of $12,500 for his involvement in the contraventions of the first respondent of ss 712(3) and 716(5) of the Fair Work Act as declared at C, D, E and F of the Order made on 11 August 2021.
2.Pursuant to s 546(3)(a) of the Fair Work Act, the pecuniary penalties ordered to be paid by the respondents in order 1 above be paid to the Commonwealth of Australia within 28 days of this Order.
3.The applicant have liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
I certify that the preceding seventy-three (73) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Ladhams. Associate:
Dated: 22 March 2022
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