Fair Work Ombudsman v Stewarts Transport & Logistics Pty Ltd & Ors
[2010] FMCA 905
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v STEWARTS TRANSPORT & LOGISTICS PTY LTD & ORS | [2010] FMCA 905 |
| INDUSTRIAL LAW – Admitted breaches of Workplace Relations Act 1996, Transport Workers Award 1998 and Workplace Relations Regulations 2006 – underpayments, failure to keep records, failure to provide payslips – quantum of penalties. |
| Australian Fair Pay and Conditions Standard Transport Workers Award 1998, cls.12.5.4, 34.9, 37.2 Workplace Relations Regulations 2006, regs.19.11(1), 19.11(2), 19.20(3) Workplace Relations Act 1996, s.185(2) |
| Australian Competition and Consumer Commission v Dimmeys Stores Pty Ltd (1999) ATPR 41-716; [1999] FCA 1175 Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 Furlong v Maxim Electrical Services (Aust) Pty Ltd (No.3) [2006] FCA 1705 Joshua Iser v Jumarna Pty Ltd and Ors (unreported) No. X02936921, Magistrates’ Court of Victoria, Magistrate Chambers, 29 February 2009 Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 Longmire v Murray Clarke Enterprises Pty Ltd (2008) FMCA 1028 Lynch v Buckley Sawmills Pty Ltd (1984) 3 FCR 503; (1984) 9 IR 469 Cotis v Pow Juice Pty Ltd [2007] FMCA 140 Pine v Casello Constructions Pty Ltd [2005] FCA 1854 Ponzio v B & P Caelli Constructions Pty Ltd and Ors (2007) 158 FCR 543; (2007) 162 IR 444; [2007] FCAFC 65; (2007) 59 AILR 100-669; [2007] ALMD 6759 R v Dowie (1989) 42 A Crim R 234; [1989] Tas R 167; [1989] TASSC 44 R v Shannon (1979) 21 SASR 442 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | STEWARTS TRANSPORT & LOGISTICS PTY LTD (ACN 005 893 685) |
| Second Respondent: | RODNEY STEWART |
| Third Respondent: | PAMELA STEWART |
| File Number: | MLG 1057 of 2010 |
| Judgment of: | Riley FM |
| Hearing date: | 12 November 2010 |
| Date of Last Submission: | 12 November 2010 |
| Delivered at: | Melbourne |
| Delivered on: | 3 December 2010 |
REPRESENTATION
| Counsel for the Applicant: | Ms Hartigan |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| Counsel for the Respondents: | Mr Larkin |
| Solicitors for the Respondents: | Peterson Westbrook Cameron Pty Ltd |
THE COURT DECLARES THAT:
The first respondent contravened the following applicable provisions of the Transport Workers Award 1998 (Award), the Australian Fair Pay and Conditions Standard (AFPCS), which included a preserved Australian Pay and Classification Scale (APCS) derived from the Award and the Workplace Relations Regulations 2006 (WR Regs):
(a)s.185(2) of the Workplace Relations Act 1996 (WR Act);
(b)clause 37.2 of the Award;
(c)clause 12.5.4 of the Award;
(d)clause 34.9 of the Award;
(e)reg.19.11(1) of the WR Regs;
(f)reg.19.11(2) of the WR Regs; and
(g)reg.19.20(3) of the WR Regs.
The second respondent was involved in the contraventions specified in declarations 1(a)-(d) within the meaning of s.728(1) of the WR Act.
By reason of declaration 2, the second respondent contravened the following applicable provisions of the Award and the WR Act:
(a)s.185(2) of the WR Act as a term of the AFPCS;
(b)clause 37.2 of the Award;
(c)clause 12.5.4 of the Award; and
(d)clause 34.9 of the Award.
The third respondent was involved in the contraventions specified in declarations 1(a)-(g) within the meaning of s.728(1) of the WR Act.
By reason of declaration 4, the third respondent contravened the following applicable provisions of the Award, the WR Act and the WR Regs:
(a)s.185(2) of the WR Act as a term of the AFPCS;
(b)clause 37.2 of the Award;
(c)clause 12.5.4 of the Award;
(d)clause 34.9 of the Award;
(e)reg.19.11(1) of the WR Regs;
(f)reg.19.11(2) of the WR Regs; and
(g)reg.19.20(3) of the WR Regs.
THE COURT ORDERS THAT:
Pursuant to s.841(a) of the WR Act, the first respondent pay into the Consolidated Revenue Fund of the Commonwealth an aggregate penalty of $43,500.
Pursuant to s.841(a) of the WR Act, the second respondent pay into the Consolidated Revenue Fund of the Commonwealth an aggregate penalty of $8,000.
Pursuant to s.841(a) of the WR Act, the third respondent pay into the Consolidated Revenue Fund of the Commonwealth an aggregate penalty of $8,700.
The payment of the pecuniary penalties referred to in orders 6 to 8 be stayed for three months from the date of this order.
The parties have liberty to apply.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 1057 of 2010
| FAIR WORK OMBUDSMAN |
Applicant
And
| STEWARTS TRANSPORT & LOGISTICS PTY LTD (ACN 005 893 685) |
First Respondent
| RODNEY STEWART |
Second Respondent
| PAMELA STEWART |
Third Respondent
REASONS FOR JUDGMENT
Introduction
This is an application for declarations and penalties. It is alleged, and the respondents accept, that they breached, or were involved in the breaches of:
a)the Australian Fair Pay and Conditions Standard (“AFPCS”);
b)the Transport Workers Award 1998 (“the Award”); and
c)the Workplace Relations Regulations 2006 (“the WR Regs”)
d)in that they underpaid an employee of the first respondent, Jonathan Howden, failed to keep proper records and failed to provide pay slips.
The applicant is the Fair Work Ombudsman. The first respondent was at all material times a company that employed Mr Howden. The second respondent was at all material times the sole director and secretary of the first respondent. The third respondent was at all material times the wife of the second respondent and was jointly responsible with him for setting and paying Mr Howden his wages.
Mr Howden was employed by the first respondent as a casual truck driver for the period of 3 February 2009 to 7 April 2009. Mr Howden was an adult and was properly classified as a Grade 6 driver.
The first respondent paid him $16 or $18 per hour, when the first respondent should have paid him:
a)a casual loading, bringing his ordinary pay to $20.64 per hour;
b)overtime at $24.76 per hour for the first two hours and $33.02 per hour thereafter for all work done outside ordinary hours;
c)an additional 10% overtime rate by virtue of Mr Howden being casual, making the correct rates $26.42 for the first two hours and $34.67 per hour thereafter; and
d)an allowance of 15% for afternoon shift, amounting to $23.12 per hour.
As a result of the failure by the first respondent to pay Mr Howden the appropriate amount, his total wage while employed by the first respondent was $7,393 gross instead of $10,621.46 gross, a shortfall of $3,228.46. In other words, the first respondent paid Mr Howden about 30% less than it should have.
Additionally, the first respondent failed to:
a)make records of Mr Howden’s time and wages in accordance with Division 3 of Part 19 of the WR Regs; and
b)give Mr Howden payslips in accordance with Division 6 of the WR Regs.
The second respondent aided, abetted, counselled or procured, and induced or was knowingly concerned in the breaches in regard to the
a)casual loading;
b)overtime;
c)additional overtime; and
d)shift allowances.
The third respondent aided, abetted, counselled or procured and induced or was knowingly concerned in the breaches in regard to all of the matters listed in paragraph 7 and, in addition, the breaches regarding:
a)wage records; and
b)payslips.
Agreed statement of facts
The respondents accepted all of the allegations in the statement of claim. The applicant and the respondents filed an agreed statement of facts. It is as follows:
The Application
1.On 27 July 2010, the Applicant filed an Application and Statement of Claim in this Court in which the Applicant alleged that the First Respondent allegedly underpaid a former employee, Mr Jonathan Howden. The Applicant also alleged that the Second and Third Respondents were involved in the underpayments.
2.The Applicant is seeking orders under s.719 and s.728 of the Workplace Relations Act 1996 (WR Act) imposing pecuniary penalties on the Respondents for contraventions of the Transport Workers Award 1998 (Award), the Australian Fair Pay and Conditions Standard (AFPCS), which included a preserved Australian Pay and Classifications Scale (APCS) derived from the Award and the Workplace Relations Regulations 2006 (WR Regs).
Admitted Contraventions
3.The First Respondent admits to contravening the following terms of the Award, the WR Act and the WR Regs in respect of Mr Jonathan Howden during his employment with the First Respondent:
a. section 185(2) of the WR Act as a term of the AFPCS providing for the payment of casual loadings;
b. the term of the Award providing for the payment of overtime (clause 37.2);
c. the term of the Award providing for an additional payment to casual employees for working overtime (clause 12.5.4 of the Award);
d. the term of the Award providing for the payment of an afternoon shift allowance (clause 34.9 of the Award).
e. the terms of the WR Regs providing for the making of employee records and the issuing of written payslips:
· regulation 19.11(1);
· regulation 19.11(2); and
· regulation 19.20(3).
4.The First Respondent admits the contraventions of the Award and the WR Act resulted in underpayments in wages and entitlements to Mr Howden totalling $3,228.46 gross.
5.The Second Respondent admits to his involvement, within the meaning of s.728 of the WR Act, in contravening the Award and the WR Act in respect of Mr Howden as set out in paragraphs (3)(a)-(d) above.
6.Third Respondent admits to her involvement, within the meaning of s.728 of the WR Act, in contravening the Award, the WR Act and the WR Regs in respect of Mr Howden as set out in paragraph (3)(a)-(e) above.
The Parties and the Relevant Employee
7.The Applicant is a Fair Work Inspector pursuant to s.701 of the Fair Work Act 2009 (FW Act).
8.At all relevant times, the First Respondent:
a. was incorporated under the Corporations Act 2001;
b. operated a transport/freight business located at 24 Alstonvale Court, Bendigo, Victoria (Business);
c. was an employer within the meaning of section 6(1) of the WR Act;
d. was the employer of Jonathan Howden (Howden);
e. was bound by the Award as a named respondent in respect of Howden;
f. had an average annual revenue of $1,600,000.00 and its deficits over the last 3 years have been
i. - $247,264.37 for 07/08 financial year;
ii. -$610,882.88 for 08/09 financial year;
iii. -$801,838.08 for 09/10 financial year; and
g. Now employs no employees to work in the Business.
9. At all relevant times, the Second Respondent was:
a. the sole Director of the First Respondent;
b. the Secretary of the First Respondent;
c. one of two Shareholders of the First Respondent;
d. jointly responsible with the Third Respondent for the overall direction, management and supervision of the First Respondent’s operations;
e. jointly responsible with the Third Respondent for setting and adjusting the pay rates and wages and hours of work for Howden as an employee of the First Respondent;
f. aware of the fact that the First Respondent was bound by the Award and legally obliged to provide to Howden certain minimum entitlements as determined by the Award and/or legislation; and
g. aware of the fact that the First Respondent was not providing to Howden all of his minimum entitlements as determined by the Award and/or legislation.
10. At all relevant times, the Third Respondent was:
a. one of two Shareholders of the First Respondent;
b. a former Director of the First Respondent (between 30 March 1993 and 30 August 2005);
c. the former Secretary of the First Respondent (between 30 March 1993 and 30 August 2005);
d. jointly responsible with the Second Respondent for the overall direction, management and supervision of the First Respondent’s operations;
e. jointly responsible with the Second Respondent for setting and adjusting the pay rates and wages and hours of work for Howden as an employee of the First Respondent;
f. responsible for processing timesheets and arranging payments of wages to Howden as an employee of the First Respondent;
g. aware of the fact that the First Respondent was bound by the Award and legally obliged to provide to Howden certain minimum entitlements as determined by the Award and/or legislation; and
h. aware of the fact that the First Respondent was not providing to Howden all of his minimum entitlements as determined by the Award and/or legislation.
The Employment of Mr Howden by the First Respondent
11.At all material times from 3 February 2009 to 7 April 2009, Howden:
a. was employed by the First Respondent on a casual basis as a driver of a semi-trailer and heavy rigid vehicle with GCM of 42.5 tonnes;
b. worked shift work on the days Monday to Friday;
c. was paid by the First Respondent a flat hourly rate of $18.00 per hour for all hours worked (save that he was paid a flat hourly rate of $16.00 per hour for all hours worked in the week 16 March 2009 to 20 March 2009); and
d. was an adult employee (being 39 years of age).
12.At all material times Howden was properly classified as a Grade 6 driver under the Award.
Coverage of applicable industrial instruments
13.By reason of the matters alleged in paragraphs 8 and 11 above, at all material times the First Respondent was bound in relation to Mr Howden:
a. by the casual loading provision contained in the preserved APCS derived from the Award;
b. by the overtime provision in clause 37.2 of the Award;
c. by the additional overtime provision for casual employees in clause 12.5.4 of the Award;
d. by the shift allowance provision in clause 34.9 of the Award;
e. to make or cause to be made a record in accordance with Division 3 of Part 19 of the WR Regs; and
f. to issue to Howden a written payslip in accordance with Division 6 of Part 19 of the WR Regs.
Breaches of applicable industrial instruments
Failure to pay a casual loading
14.By reason of the matters alleged in paragraph 13(a) herein, the First Respondent was obliged to pay Howden, pursuant to the APCS, a 25% casual loading for ordinary hours of work in addition to the relevant basic hourly rate of $16.51 per hour.
15.By reason of the matters alleged in paragraphs 12 and 14 herein, the First Respondent was obliged to pay Howden, pursuant to the APCS, a casual hourly rate for ordinary hours of work of $20.64 per hour.
16.By reason of the matters alleged in paragraph 15 herein, by acting as alleged in paragraph 11(c) herein, the First Respondent breached a term of the AFPCS providing for the payment of casual loadings contained in the APCS (s.185(2) of the WR Act).
Failure to pay overtime
17.By reason of the matters alleged in paragraph 13(b) herein, the First Respondent was obliged to pay Howden, pursuant to the Award, overtime rates of:
a. time and a half for the first two hours on any one day; and
b. double time thereafter;
for all work done outside ordinary hours as prescribed in clause 33.3 of the Award as ordinary hours of work.
18.By reason of the matters alleged in paragraphs 12 and 17 herein, the First Respondent was obliged to pay Howden, pursuant to the Award, overtime rates of $24.76 per hour for the first two hours and $33.02 per hour thereafter.
19.At all materials times the First Respondent did not pay Howden overtime rates for working outside of the hours prescribed in clause 33.3 of the Award as ordinary hours of work.
20.By reason of the matters alleged in paragraph 18 herein, by acting as alleged in paragraph 19 herein, the First Respondent breached clause 37.2 of the Award.
Failure to pay additional overtime for casual employees
21.By reason of the matters alleged in paragraph 13(c) herein, the First Respondent was obliged to pay Howden, pursuant to the Award, an additional 10% to normal overtime rates of pay for casual employees of:
a. time and a half for the first two hours on any one day; and
b. double time thereafter;
for all work done outside ordinary hours as prescribed in clause 33.3 of the Award as ordinary hours of work.
22.By reason of the matters alleged in paragraphs 12 and 21 herein, the First Respondent was obliged to pay Howden, pursuant to the Award, overtime rates of $26.42 per hour for the first two hours and $34.67 per hour thereafter.
23.At all material times the First Respondent did not pay Howden overtime rates for working outside of the hours prescribed in clause 33.3 of the Award as ordinary hours of work.
24.By reason of the matters alleged in paragraph 22 herein, by acting as alleged in paragraph 23 herein, the First Respondent breached clause 12.5.4 of the Award.
Failure to pay shift allowance
25.By reason of the matters alleged in paragraph 13(d) herein, the First Respondent was obliged to pay Howden, pursuant to the Award, an additional 15% shift allowance for working a rotating afternoon shift finishing after 6:30pm but not later than 12.30am as prescribed by clauses 34.1.2 and 34.9 of the Award.
26.By reason of the matters alleged in paragraphs 12 and 25 herein, the First Respondent was obliged to pay Howden, pursuant to the Award, $23.12 per hour for all hours worked during an afternoon shift.
27.At all materials times, the First Respondent did not pay Howden a shift allowance when working rotating afternoon shifts finishing after 6:30pm but not later than 12.30am.
28.By reason of the matters alleged in paragraphs 26 herein, by acting as alleged in paragraph 27 herein, the First Respondent breached clause 34.9 of the Award.
Employee records and pay slip breaches
29.At various times during Howden’s employment with the First Respondent, the First Respondent did not:
a. make or cause to be made a record in accordance with Division 3 of Part 19 of the WR Regs; or
b. issue to Howden a written payslip in accordance with Division 6 of Part 19 of the WR Regs.
30.By reason of the matters alleged in paragraphs 13(e) and 13(f) herein, by acting as alleged in paragraph 29 herein, the First Respondent breached:
a. regulation 19.11(1) of the WR Regs;
b. regulation 19.11(2) of the WR Regs; and
c. regulation 19.20(3) of the WR Regs.
31.The Applicant and the First Respondent agree to declarations being made by the Court that the First Respondent contravened the terms of the Award, WR Act and the WR Regs as set out in paragraphs 3 above.
32.The Applicant and the Second and Third Respondents agree to declarations being made by the Court that the Second and Third Respondents were involved in the contraventions within the meaning of section 728 of the WR Act, as set out in paragraphs 5 and 6 above.
Investigation and Institution of Proceedings
33.On 3 March 2008, 7 February 2008, 25 September 2007, 19 September 2007 and 29 August 2007 the then Workplace Ombudsman (WO) wrote to the Second Respondent in relation to alleged breaches of the Award or WR Regs affecting other employees of the First Respondent.
34.On 3 March 2008 and 2 July 2004 the WO and the Office of Workplace Services wrote to the Third Respondent in relation to alleged breaches of the Award affecting other employees of the First Respondent.
35.On 10 September 2009, the FWO received a Wages and Conditions Claim Form from Mr Howden with respect to his employment with the First Respondent (Mr Howden’s Complaint).
36.On 29 September 2009, the FWO contacted the Second Respondent to discuss Mr Howden’s Complaint. The FWO advised the Second Respondent that a complaint had been made and that a letter would be sent to him regarding the matter.
37.On 29 September 2009, the FWO sent the First and Second Respondents a letter in relation to Mr Howden’s Complaint. The letter set out that the matter may be resolved directly with Howden or alternatively, a Fair Work Inspector would be in contact regarding the matter.
38.On 13 October 2009, the Second Respondent sent a letter to Mr Howden. The letter stated that to resolve the claim, he needed to provide him with exact details and dates for which he was claiming to be wrongly paid and the reasons why.
39.On 4 January 2010, the FWO contacted the Second Respondent in relation to Mr Howden’s Complaint. The Second Respondent advised that he has sent a letter to Mr Howden and had not received a response. The FWO advised the Second Respondent that a Fair Work Inspector would be dealing with the matter. The FWO also sent the First and Second Respondents a Notice to Produce (NTP) documents relating to the employment of Mr Howden by the First Respondent.
40.On 19 January 2010, the Second Respondent sent a letter to Mr Howden that requested he respond to his previous letter.
41.On 22 January 2010, the FWO contacted the Second Respondent in relation to Mr Howden’s Complaint and to enquire when it would be receiving the documents set out in the NTP. During this conversation, the Second Respondent said the he was trying to resolve the matter between himself and Mr Howden. The FWO advised him that Mr Howden has requested that the FWO look into the matter.
42.On 28 January 2010, the FWO received some time and wage records relating from the Respondents in response to the NTP.
43.On 1 February 2010, the FWO sent the First and Second Respondents Determination of Contravention letter identifying the breaches of the Award, the WR Act and the WR Regs in respect of Mr Howden, and attached an assessment of Mr Howden’s outstanding entitlements (of $3,725.27 gross). The letter required the First Respondent to rectify the assessed underpayments or advise the FWO by 16 February 2010, of action taken to comply.
44.On 8 February 2010, the Second Respondent sent an email to the FWO requesting the spreadsheet used to calculate the figure set out in the Contravention Letter. The FWO replied to the email with the requested attachment.
45.On 29 March 2010, the FWO contacted the Second Respondent as it had not received a response to the Contravention Letter. During this conversation the Second Respondent asked if the Third Respondent had called and that he would need to check with the Third Respondent as to whether any payment had been made. The FWO also told the Second Respondent that it would be giving him the opportunity to participate in a Record of Interview (ROI).
46.Later that day (29 March 2010), the Third Respondent contacted the FWO and advised that she was the payroll officer for the First Respondent. During this conversation, the Third Respondents asked why the FWO was proceeding with this matter as they were broke. The FWO said that the identified contraventions appeared to be a recurring issue which had not been resolved by the First Respondent.
47.On 29 March 2010, the FWO sent the First and Second Respondents a letter formally inviting the company to participate in a ROI.
48.On 7 April 2010, the Second Respondent asked that the FWO send to him a list of questions which would be asked in the ROI.
49.On 12 April 2010, the FWO sent the First and Second Respondents a letter which set out that the questions asked during the ROI would be of a general nature relating to the employment of Mr Howden and that any specific questions would depend on what answers were given.
50.On 14 April 2010, the FWO received an email from the Second Respondent which stated that they did not wish to take part in a formal record of interview.
51.On 23 June 2010, the FWO contacted the Second Respondent to give the First Respondent one final opportunity to finalise the matter relating to Mr Howden by rectifying the outstanding underpayment. The Second Respondent advised that he would not be able to make the payment as the company is broke. He then requested the FWO to contact his accountant about the matter.
52.Later that day (23 June 2010) the FWO contacted the First Respondent’s Accountant, Mr John Clarke of Aubrey Patton and Associates, who advised that the business was about to be placed into liquidation. During this conversation, Mr Clarke said that the First Respondent was not really trading and that another business that used to do freighting for the First Respondent is now under hire to the Stewarts Family Trust. The FWO also asked whether he was aware of Mr Howden’s Complaint and said that the FWO (and its predecessors) had received around 10 underpayment complaints regarding the First Respondent. Mr Clarke advised the FWO that he would be pushing forward with the liquidation and advising the Respondents not to make any payments to Mr Howden as other employees would then be disadvantaged.
53.On 23 July 2010, the FWO sent the First and Second Respondents a letter advising that the investigation relating to Mr Howden’s Complaint had been referred to the Legal Group and it had instructions to file the enclosed Court Complaint.
54.On 27 July 2010, the First Respondent paid to Mr Howden the full amount of the assessed underpayment of $3,228.46 (less tax).
55.On 27 July 2010, the Applicant filed an Application and Statement of Claim in this Court seeking the imposition of penalties against each of the Respondents for alleged breaches of the WR Act, Award and the WR Regs.
56.On 24 August 2010, consent orders were agreed as to how the matter would proceed including:
a. the matter being set down for a Penalty Hearing; and
b. the parties filing a Statement of Agreed Facts, the parties filing and serving submissions and any evidentiary material upon which they seek to rely at the hearing prior to the Penalty Hearing.
Agreed Summary of matters to be determined by the Court
57.The matters to be determined by the Court are:
a. the making of declarations that the First Respondent contravened the Award, the WR Act and the WR Regs as set out in paragraph 3 above;
b. the making of declarations that the Second Respondent was involved in contravening the Award and the WR Act as set out in paragraph 5 above;
c. the making of declarations that the Third Respondent was involved in contravening the Award, the WR Act and the WR Regs as set out in paragraph 6 above; and
d. the quantum of penalty to be imposed on the Respondents in respect of the contraventions.
On the basis of their admissions, I find that the allegations against the respondents are proved.
Additional evidence
In addition to the statement of agreed facts, the applicant has filed affidavits affirmed by Daniel Tan on 30 September 2010 and by Clare Hartigan on 1 October 2010. That evidence was not challenged. I accept it.
Mr Tan said:
1.I am a Fair Work Inspector with the Fair Work Ombudsman, the Plaintiff in these proceedings.
2.I make this affidavit from my own knowledge and from reference to the Fair Work Ombudsman (FWO) file. Where I make this affidavit on the basis of information provided to me by others, I believe that information to be true and correct.
3.I currently have carriage of the investigation in relation to this matter.
4.FWO maintains a record of complaints received in relation to employers on an electronic database referred to as Claims II. FWO also keeps a record of correspondence sent to employers in relation to those complaints on a paper file which is accessible to authorised employees of FWO. I am authorised to access those records in the course of my employment.
5.I have accessed the Claims II database and have conducted a search for all complaints made against the named Respondents in these proceedings. A copy of the Claims II search regarding the First Respondent is annexed and marked Annexure A.
6.The search results indicate that:
(a)there have been eleven previous complaints made to FWO (or its predecessors) of which seven were sustained;
(b)five complaints were resolved by voluntary compliance; and
(c)two complaints were resolved by claimant litigation.
7.I also currently have carriage of 2 further investigations relating to complaints made in relation to the First Respondent.
8.Claim BC000849 related to a calculated underpayment of $1,122.60 pursuant to the Transport Workers Award 1998 (Award). A copy of the finalisation letter in relation to that complaint, addressed to the First and Third respondents is annexed and marked Annexure B.
9.Claim TC001312 related to a calculated underpayment of $1,476.92 pursuant to the Award and a failure to keep records in accordance with the Workplace Relations Regulations 2006. A copy of the finalisation letter in relation to that complaint, addressed to the First and Second Respondents in this matter is annexed and marked Annexure C.
10.Claim TC002065 related to a calculated underpayment of $1,482.68 pursuant to the Award. A copy of the finalisation letter in relation to that complaint, addressed to the First and Second Respondents in this matter is marked Annexure D.
11.Claim BC001944 related to a calculated underpayment of $7,657.21 pursuant to the Award. A copy of the finalisation letter in relation to that complaint, addressed to the three Respondents in this matter is annexed and marked Annexure E.
Ms Hartigan said:
1.I am a Lawyer employed by the Office of the Fair Work Ombudsman (FWO).
2.Subject to the supervision of Ben Vallence, Principal Lawyer (Acting), I have care and conduct of this matter. I make this affidavit from my own knowledge.
3.On 23 July 2010, I sent the Respondents a letter which attached a draft Court Complaint and Statement of Claim.
4.On the afternoon of 26 July 2010 I received a telephone call to my office from a number identified on my telephone caller identification as (03) 5449 3086. The female caller identified herself as Pamela Stewart, who is the Third Respondent in this matter.
5.During the telephone call Mrs Stewart made a number of statements with words to the effect of:
a.Employees were “all morons”;
b.That “another bloke set us up years ago” and “all the employees set us up, we are broke from bloody people - $45,000 here, $10,000 there”;
c. That she “can’t make any money from trucks”;
d.We [FWO] were “all for the employees”; she had “no fucking rights” and that [FWO] was “draining the life out of her”. She would “just bloody pay it and be done with it”;
e.“If I ever saw him [Howden] again I would kill him – I would spit on him in the street”;
f.Referred to her former employee as “bloody Howden”;
g.Asked where she should “pay the bloody money” and that tomorrow first thing they would pay and she would fax through a receipt; and
h.she couldn’t believe [FWO] “will bloody go me even though I will pay”.
6.The tone of voice and offensive language used by Mrs Stewart throughout the telephone call was very aggressive.
7.I advised her that I would confirm the bank details for Mr Howden and would call her back to advise her where to pay the money. I then ended the telephone call.
The second respondent filed an affidavit sworn by him on 28 October 2010. It was not challenged.
The second respondent said:
1.I am a Director of the First Respondent and I am the second named Respondent.
2.I make this affidavit from my own knowledge. Where I make this affidavit on the basis of information provided to me by others, I believe that information to be true and correct.
3.I am 63 years of age and suffer from a heart condition. I have been advised by my doctor to avoid stress as it could have serious consequences on my health. I have no intention to ever be involved in the management of a company or business in the future. Annexed hereto and marked with the letters “RS1” is a true copy of a letter from Dr. Adel Asaid of Strathfieldsaye Primary Health dated 29th September, 2010.
4.The First Respondent has failed to make a profit for a number of years and is been (sic) wound up. I and the third respondent have been in significant financial difficulty for some time as a result of the financial failure of the Company. I believe that it is likely that I and the Third Respondent will be forced into bankruptcy. Annexed hereto and marked with the letters ‘RS2” is a true copy of Income Tax Returns of Stewarts Transport & Logistics Pty. Ltd. for the financial years 2007/08, 2008/09 and 2009/10.
5.To the best of my knowledge the Third Respondent is receiving a Centrelink retirement pension and has no intention to ever be involved in the management of a company or business in the future.
6.I and the third respondent have suffered great embarrassment and distress as a result of a media release to local media outlets in Bendigo and Victoria outlining the alleged breaches and claims against the three Respondents, which are now the subject of this proceeding. Annexed hereto and marked with the letters ‘RS3” is a true copy of the said media releases.
The second respondent said in his affidavit that the first respondent “is been wound up”. The respondents’ written submissions also claimed that the first respondent “is been wound up”: page 2, last paragraph, page 4, paragraphs 2 and 6 and page 3, paragraph 5. However, the respondents’ counsel made it clear at the hearing of this matter that the first respondent has not actually been placed into liquidation. There was mention at the hearing of the possibility that the first respondent may have been trading while insolvent for some years. Counsel for the respondents also mentioned at the hearing that the first respondent might still be the owner of some trucks, although others had been repossessed.
I take it from counsel’s statements made at the hearing, and from the absence of any sign of a liquidator, that the first respondent is not actually in liquidation. The placing the first respondent into liquidation would have been an obvious and simple step:
a)if its financial position was as bad as the respondents suggest; and
b)if the second and third respondents genuinely intended to take no further part in the management of a company in the future.
As that simple and obvious step was not taken, I am left with considerable doubt about these matters. To the extent that the first respondent still needs to be managed, it seems that the second respondent as its sole director and possibly the third respondent are continuing in their former roles.
Exhibit RS1 is a photocopied letter on the letterhead of Strathfieldsaye Primary Health. It is dated 2 September 2010, identifies the second respondent and appears to be signed by a doctor. Otherwise, it says, in total:
Due to the complicated medical history of Mr Stewart, I strongly advise him to avoid stress, as it could have serious consequences on his health.
This evidence has not been sworn or affirmed. It does not explain, for example:
a)the second respondent’s medical history;
b)how likely it is that there might be serious consequences for his health if he is stressed; or
c)whether there are steps that could reasonably and successfully be taken to ameliorate the consequences of any stress experienced by the second respondent.
Consequently, I am unable to place any great weight on the medical evidence.
Exhibit RS2 contains the tax returns of the first respondent for the last three financial years. They reflect the profit and loss position described in the statement of agreed facts.
Exhibit RS3 is a media release dated 4 August 2010 from the Fair Work Ombudsman concerning this case, and an article from the Bendigo Advertiser of 6 August 2010, also concerning this case. It names the respondents and outlines the allegations against them and the maximum penalties they face.
Legislative provisions relating to penalty
The applicant made the following written submissions in relation to the legislative provisions relating to penalty, which the respondents accepted as an accurate statement of the law:
…
3.2.The alleged contraventions occurred before the commencement of the Fair Work Act 2009 (FW Act) and the repeal of the WR Act by the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Transition Act) on 1 July 2009.
3.3Notwithstanding the repeal of the WR Act, the Transition Act provides that an application that could have been made or continued by a workplace inspector may be made or continued on and after 1 July 2009 by a Fair Work Inspector.[1] The Plaintiff is a Fair Work Inspector pursuant to section 701 of the FW Act.
3.4The Transition Act also provides that the WR Act continues to apply, on and after the repeal of the WR Act, in relation to conduct that occurred before 1 July 2009.[2]
3.5Section 719(1) of the WR Act enables an eligible court[3] to impose a penalty in respect of a breach of an applicable provision by a person bound by the provision. “Applicable provision” is defined in section 717 to include a term of an Award and a term of the AFPCS.
3.6Section 719(2) provides that where two or more breaches of a term of an applicable provision are committed by the same person, and the breaches arose out of a course of conduct by the person, the breaches are taken to constitute a single breach of the provision.
3.7Regulation 14.4 of Chapter 2 of the WR Regs enables this Court to order a person who contravenes a civil remedy provision of the WR Regs to pay a pecuniary penalty of up to the maximum penalty permissible under section 846(2)(g) of the WR Act.
3.8Regulation 14.5 provides that where two or more contraventions of a civil remedy provision are committed by a person, and each contravention relates to the same action or course of conduct of the person, the contraventions are taken to be a single contravention of the civil remedy provision.
[1] Clause 13(1), Schedule 18 Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (Transition Act).
[2] Clause 11(1), Schedule 2, Transition Act.
[3] Defined to include this Court.
Maximum penalties in general
The applicant made the following submissions, which the respondents accepted, in relation to the maximum penalties that could be imposed for the types of breaches that occurred in this case:
3.9Section 719(4) of the WR Act prescribes the maximum penalty that may be imposed by this Court to be, in the case of an individual, 60 penalty units and in the case of a body corporate, 300 penalty units.
3.10Section 846(2)(g) of the WR Act and regulation 14.4 of the WR Regs prescribe the maximum penalty that may be imposed by this Court for each contravention of the WR Regs to be, in the case of an individual, 10 penalty units and in the case of a body corporate, 50 penalty units.
3.11Section 4(1) of the WR Act provides that “penalty unit” has the same meaning as in the Crimes Act 1914 (Cth) (Crimes Act). Section 4AA of the Crimes Act defines a “penalty unit” to be $110 dollars.
3.12Therefore, the maximum penalty that may be imposed by the Court for each breach of the Award and the AFPCS is:
·$33,000 for each breach by the First Respondent (as a body corporate); and
·$6,600 for each breach of an applicable provision by the Second and Third Respondents (as individuals).
3.13The maximum penalty that may be imposed by the Court for each breach of the WR Regs is:
·$5,500 for each contravention by the First Respondent (as a body corporate); and
·$1,100 for each contravention by the Third Respondent (as an individual).
Approach to determining penalty
The applicant submitted, and the respondents accepted, that the proper approach to determining penalty in cases such as this is as follows:
4.2The first step for the Court is to identify the separate contraventions involved. Each breach of each separate obligation found in the Award and the AFPCS in relation to the employee is a separate contravention of a term of an applicable provision for the purposes of section 719 of the WR Act[4]; as is each breach of each applicable regulation for the purposes of regulation 14.4 of the WR Regs. However, section 719(2) of the WR Act and regulation 14.5 of the WR Regs provide for treating multiple breaches, involved in a course of conduct, as a single breach.
4.3Secondly, the Court will then consider an appropriate penalty to impose in respect of each contravention (whether a single contravention or a course of conduct), having regard to all of the circumstances of the case.
4.4Thirdly, to the extent that two or more contraventions have common elements, this should be taken into account in considering what is an appropriate penalty in all the circumstances for each contravention. Each Respondent should not be penalised more than once for the same conduct. The penalties imposed by the Court should be an appropriate response to what each Respondent did.[5] This task is distinct from and in addition to the final application of the “totality principle”.[6]
4.5Fourth and finally, having fixed an appropriate penalty for each group of contraventions or course of conduct, the Court should take a final look at the aggregate penalty, to determine whether it is an appropriate response to the conduct which led to the breaches.[7] The Court should apply an “instinctive synthesis” in making this assessment.[8] This is what is known as an application of the “totality principle”.
[4] Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216 at 223; McIver v Healey [2008] FCA 425 at [16] (unreported, Federal Court of Australia, 7 April 2008, Marshall J).
[5] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 at [46] (Graham J) (unreported, Full Court of the Federal Court of Australia, 20 February 2008, Gray, Graham and Buchanan JJ) (Merringtons).
[6] Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70 at [41]-[46] (Stone and Buchanan JJ) (unreported, Full Court of the Federal Court of Australia, 7 May 2008, Gyles, Stone and Buchanan JJ) (Mornington Inn).
[7] See Kelly v Fitzpatrick (2007) 166 IR 14 at [30] (Tracey J) (Kelly); Merringtons, supra at [23] (Gray J), [71] (Graham J) and [102] (Buchanan J).
[8] Merringtons, supra at [27] (Gray J) and [55] and [78] (Graham J).
The maximum penalty in the circumstances of this case
The applicant accepted that in this case, although there were repeated breaches, many of them fell within a single course of conduct, such that they should be treated as one breach. Consequently, the applicant submitted, and the respondent accepted, that:
a)all of the failures to pay casual loading in breach of s.185(2) of the Workplace Relations Act 1996 (“WR Act”) as a term of the AFPCS should be treated as a single breach, in respect of which the maximum penalty for:
i)the first respondent, is $33,000; and
ii)the second and third respondents, is $6,600 each;
b)all of the failures to pay overtime in breach of clause 37.2 of the Award should be treated as a single breach, in respect of which the maximum penalty for:
i)the first respondent, is $33,000; and
ii)the second and third respondents, is $6,600 each;
c)all of the failures to pay additional overtime for casual employees in breach of clause 12.5.4 of the Award should be treated as a single breach, in respect of which the maximum penalty for:
i)the first respondent, is $33,000; and
ii)the second and third respondents, is $6,600 each;
d)all of the failures to pay shift allowance in breach of clause 34.9 of the Award should be treated as a single breach, in respect of which the maximum penalty for:
i)the first respondent, is $33,000; and
ii)the second and third respondents, is $6,600 each;
e)as they overlap, all of the failures to make or cause to be made a record of the rate of remuneration paid to an employee in breach of regulation 19.11(1) of the WR Regs and all of the failures to record the hours worked by an employee in breach of regulation 19.11(2) of the WR Regs should be treated as a single breach, in respect of which the maximum penalty for:
i)the first respondent, is $5,500; and
ii)the third respondent, is $1,100;
f)all of the failures to issue written payslips in compliance with regulation 19.20(3) of the WR Regs should be treated as a single breach, in respect of which the maximum penalty for:
i)the first respondent, is $5,500; and
ii)the third respondent, is $1,100.
Consequently, the maximum total penalties that could be imposed in this case are:
a)$148,500.00 for the first respondent;
b)$26,400 for the second respondent; and
c)$29,700 for the third respondent.
Relevant factors in determining penalty
The applicant submitted, and the respondents accepted, that a convenient checklist of the factors that the court might consider in determining penalty include the matters that were identified by Mowbray FM in Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 at [26]-[59] and adopted by Tracey J in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [14]. That list is as follows:
(a)The nature and extent of the conduct which led to the breaches.
(b)The circumstances in which that conduct took place.
(c)The nature and extent of any loss or damage sustained as a result of the breaches.
(d)Whether there had been similar previous conduct by the respondent.
(e)Whether the breaches were properly distinct or arose out of the one course of conduct.
(f)The size of the business enterprise involved.
(g)Whether or not the breaches were deliberate.
(h)Whether senior management was involved in the breaches.
(i)Whether the party committing the breach had exhibited contrition.
(j)Whether the party committing the breach had taken corrective action.
(k)Whether the party committing the breach had cooperated with the enforcement authorities;
(l)The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements and
(m) The need for specific and general deterrence.
Consideration of the various factors
The nature and extent of the conduct which led to the breaches
The applicant submitted that:
(a)The contravening conduct extended over a period of approximately two and half months. Although this is a relatively brief period of time, the underpayment during that period was comparatively significant.
(b)The Respondents received a benefit from the underpayments by deferring the payment of the correct entitlements; although the Plaintiff accepts that full payment has now been made to Mr Howden.
(c)The Second and Third Respondents were jointly responsible for the overall direction, management and supervision of the First Respondent’s operations which included setting and adjusting pay rates and wages for Mr Howden and for processing payments to Mr Howden as an employee of the First Respondent (paragraphs 9 and 10 of the Agreed Facts). It is submitted that in the circumstances, the Second and Third Respondents showed a complete disregard of the First Respondent’s obligations to pay Mr Howden his minimum entitlements in accordance with the law.
(d)It is also submitted that the evidence shows that the First and Third Respondents showed a complete disregard for the First Defendant’s obligations to make or cause to be made appropriate records and to issue payslips which complied with the requirements of the Regulations (paragraph 29 – 30 of the Agreed Facts).
The respondents submitted that:
The contravening conduct extended over a very short period of approximately two and half months.
The Respondents did not receive a tangible benefit from the underpayment been (sic) deferred and the full payment has now been made to Mr. Howden.
The Respondents have fully accepted that they failed to correctly pay Mr. Howden and to issue payslips which complied with the requirements of the Regulations.
There were six different types of breaches of the relevant laws, four of those types being in the nature of underpayments and the others relating to failures to keep proper records and failure to provide payslips. The underpayment was about 30% of the amount Mr Howden should have been paid. I consider that to be a very significant shortfall. The record keeping and payslip breaches are also significant because they made detection of the breaches less likely, and made it less likely that Mr Howden would ever be paid his correct wages.
Although the breaches in this case occurred over a relatively short period of about two and a half months, it was the entirety of the time that Mr Howden was employed by the first respondent. Contrary to the respondents’ submissions, they did receive a tangible benefit from their actions: they were able to defer the payment of the correct amounts owed to Mr Howden. Moreover, if the breaches had not been detected through the efforts of others, the respondents would have been able to retain for their own benefit forever the whole amount of the underpayment.
As discussed in more detail below, I accept that the respondents showed a serious and deliberate disregard for their obligations towards Mr Howden, especially as numerous claims that they had underpaid workers and failed to keep proper records had previously been sustained: see the affidavit of Daniel Tan.
I also accept that the respondents have now paid Mr Howden his outstanding wages. However, the payment was made about 10 months late, and only in the context of a prosecution being imminent. Obviously, if the respondents had not paid the outstanding wages prior to the penalty hearing, it would have had significant consequences for the quantum of the penalty.
The circumstances in which that conduct took place
The applicant submitted that:
At all relevant times the First Respondent carried on a transport/freight business trading as Stewarts Transport and Logistics based in Bendigo, Victoria. The Second and Third Respondents were jointly responsible for the management of that business (paragraphs 9 and 10 of the Agreed Facts).
The respondents submitted that:
At all relevant times the First Respondent carried on a transport/freight business trading as Stewarts Transport and Logistics based in Bendigo, Victoria. The First Respondent has failed to make a profit for a number of years and is been (sic) wound up. The First Respondents (sic) transport trucks have been leased out and therefore the Second and Third Respondents have no management in the Company or any other Company.
The respondents also submitted orally that the correct amount of wages had been difficult to calculate, as illustrated by the fact that the applicant itself had initially miscalculated Mr Howden’s correct wages: see paragraphs 43 and 54 of the agreed facts.
As discussed above in the consideration of the second respondent’s affidavit, I do not accept that the first respondent is actually being wound up. However, for present purposes, I accept that the first respondent has not made a profit for a number of years, at least as disclosed in its tax returns. (There was no suggestion that the tax returns have been verified, for example, by a tax office audit.)
The claims that the second and third respondents are not managing a company and that the first respondent has leased out its trucks were not agreed facts and were not clearly and unequivocally stated in the second respondent’s affidavit. I am unable to accept those assertions. Counsel for the respondents said at the hearing that the first respondent might still have some trucks. The second respondent’s affidavit did not clearly state that the second and third respondents are not presently taking part in the management of a company. It seems obvious that they are managing the first respondent, to the extent that it needs any management.
The respondents submitted at the hearing that they had been in financial difficulty for some years, and the first respondent should possibly have been wound up in 2008. If they had been, it was submitted, Mr Howden would not have been employed by them at all. It was also submitted that the underpayment of Mr Howden was perhaps the result of an unconscious desire to minimise losses.
I reject the argument that the first respondent’s financial difficulties constitute any sort of excuse for the underpayments. Companies that are not able to pay their debts as they fall due, including the proper amounts that they owe to their employees, are required to be wound up. It is no answer to say that, if the first respondent had been wound up, Mr Howden would not have had the benefit of a job with the first respondent.
As the applicant pointed out, in Lynch v Buckley Sawmills Pty Ltd (1984) 3 FCR 503 at 508, Keely J said that employers:
… must not be left under the impression that in times of financial difficulty they can breach an award made under the Act either with impunity or in the belief that no substantial penalty will be imposed in respect of a breach found by a court to have been committed.
The question of the employer’s financial difficulty was also addressed at some length in Cotis v Pow Juice Pty Ltd [2007] FMCA 140 at paragraphs [68] and [70], which are as follows:
[68]Mr Hatcher submits that the Court is entitled to take into account the respondent’s financial circumstances and capacity to pay in assessing the penalty. Difficulty in paying penalties should not prevent the Court from imposing penalties which are otherwise appropriate: Printing and Kindred Industries Union & Ors v Vista Paper Products Pty Ltd (1994) 127 ALR 673 per Wilcox CJ. This case considered the imposition of a penalty for breach of industrial relations legislation. His Honour said at 686.10:
Mr McNamee's claim that Vista was unable to find the funds necessary to reinstate the dismissed employees as from 10 July 1991 requires consideration. I should say that Mr Rothman objected to the admission of evidence about Vista's (or Mr McNamee's) financial position. He said it was irrelevant. But I ruled that it was relevant, at least in relation to the quantum of any penalty to be imposed on the respondents. In determining what monetary penalty to impose on an offender it is usual for a court to take into account the offender's capacity to pay. A monetary sum that would constitute a reasonable penalty to a person of average income might be unduly oppressive if imposed on an impecunious person.
Although the financial circumstances of the respondent are relevant to the imposition of penalty, His Honour made an important qualification in Printing and Kindred Industries Union & Ors v Vista Paper Products Pty Ltd at 688.3:
In fixing the amount of the daily penalties, I have not overlooked the evidence given by Mr McNamee that suggests both he and Vista are now in a parlous financial position. Mr McNamee said a meeting of his creditors had been called to consider a deed of arrangement, under Part X of the Bankruptcy Act 1966. His counsel, Mr Newlinds, tendered the Statement of Affairs prepared for that meeting. It shows a substantial excess of liabilities over assets. Most of the liabilities are for moneys said to be due under guarantees given by Mr McNamee. After the hearing, while judgment was reserved, Mr Newlinds informed me by letter that Mr McNamee had presented a debtor's petition in bankruptcy. Presumably the creditors' meeting rejected his proposal and he is now bankrupt.
While this evidence suggests that both Vista and Mr McNamee may have difficulty in paying penalties, I do not think I should allow it to deflect me from imposing whatever penalties are otherwise appropriate. It is too early to say what will be the final position in relation to either the company or Mr McNamee. If the company is successful in its challenge to the validity of the security, it seems there is every prospect of its meeting its obligations. As to Mr McNamee, much will depend on the ability of the principal debtors, whose debts he has guaranteed, to meet their obligations. Mr McNamee's affairs have not yet been independently investigated, so far as I know. It is sometimes a mistake to take a Statement of Affairs at face value. If the situation of either respondent proves as bad as suggested, relief is available under the relevant legislation.
If the circumstances require a substantial penalty to be imposed, the financial difficulty itself will not deter the imposition of a penalty.
…
[70]Mr Hatcher’s submissions acknowledge evidence of Pow Juice’s financial difficulty; however, there is ambiguity in the material before the Court. The respondent tendered a profit and loss statement and a balance sheet. However, neither document was verified by those who produced it or by an independent body. Mr Dowling asserts that the contents are broadly accurate. The balance sheet shows the total equity remaining in the business as at 31 September 2006 to be $47,649.(third affidavit of Mr Dowling, p.26) While the profit and loss statement shows, for the trading period of 1 April 2006 to 31 August 2006, a loss of $5,011 on an income of $282,000.(third affidavit of Mr Dowling, p.25) Mr Dowling claims that the loss may largely be accounted for by legal costs incurred as a result of these proceedings.
The court in Cotis went on to discuss various ambiguities in the accounts. The discussion is an illustration that bare statements in isolated accounting records, such as tax returns, do not always give a true picture of a company’s financial circumstances. Be that as it may, the respondents’ trading deficits in the last three years are accepted as facts by the applicant in this case, and, consequently, I must also accept them.
I also accept that the applicant initially made an incorrect calculation of Mr Howden’s wages. However, there was no evidence about how the error came about. Therefore, I am not able to conclude that the reason for the error was an inherent or unusual difficulty in calculating the correct amount of wages payable to Mr Howden. The applicant’s apparent error may have been the result of incorrect information, for example.
The nature and extent of any loss or damage sustained as a result of the breaches
The applicant submitted that:
(a)The amount of the total underpayment of $3,228.46 is not insignificant, especially for an employee reliant on the minimum wage.
(b)The amount was paid in full subsequent to the Respondents being advised of the impending legal proceedings (paragraph 53 of the Agreed Facts).
The respondents submitted that:
The amount of the total underpayment of $3,228.46 is not significant.
The amount has been paid in full.
The underpayment was not large in absolute terms. However, the respondents paid Mr Howden about 30% less than they should have. That is a very significant shortfall. It has now been paid in full, but only after concerted efforts by the applicant from 29 September 2009 until 27 July 2010.
Whether there had been similar previous conduct by the respondent
The applicant submitted that:
(a)…the evidence shows that the Respondents have engaged in substantially similar conduct on a number of previous occasions.
(b)The evidence demonstrates that on seven occasions over a period of approximately seven years between 2001 and 2008 complaints were received and sustained in relation [to] the named Respondents (affidavit of Daniel Tan).
(c)It is noted that the finalisation letters sent to the Respondents in relation to four of those previous investigations (affidavit of Daniel Tan) disclose conduct of a similar nature to that which is before the Court on this occasion; in particular some relate to breaches of the same Award clauses or Regulations for which the Court is determining penalty in relation to in this matter.
(d)Further, the Plaintiff submits that the prior history of complaints and investigations coupled with the matters before the Court on this occasion demonstrates in the Second and Third Respondents a longstanding, repeated and blatant disregard for their obligations as employers.
The respondents submitted that:
The Respondents have agreed that they have been the subject of previous similar claims against them. The Respondents agree that they did not put in place a robust accounting and entitlements system which would have ensured that they always met the standard required of them.
However the Respondents have resolved any and all previous claims. The Respondents have paid Mr. Howden in full.
There is no evidence about the sort of accounting system the respondents used, and whether it had any thing to do with their underpayments and record keeping failures. In any event, it was incumbent upon the respondents to use systems that were adequate for the task.
I accept that the respondents have resolved all previous claims. However, that occurred only after the matters were brought to the attention of the authorities.
At the hearing, the applicant also submitted that the respondents’ previous underpayments of workers showed that the conduct in this case involved a deliberate disregard of workers’ entitlements, and therefore was in the more serious category.
It is very significant that seven previous complaints relating to underpayment of wages and failure to keep the required records have been established against the respondents over a period of seven years. It means that the respondents had been alerted to the need to take more care in the calculation of wages and the keeping of records. The fact that the respondents underpaid wages yet again can only mean that they either do not care about whether they paid Mr Howden wages he was entitled to by law, or they deliberately decided not to pay him the wages they were required by law to pay him.
In all of the circumstances of this case, I infer that the respondents deliberately decided not to pay Mr Howden the wages that they were required to pay him by law. In reaching this conclusion, I am particularly mindful of the evidence contained in the affidavit of Clare Hartigan.
The respondents submitted at the hearing that their previous underpayments of workers had already been taken into account in the decision to prosecute and should not be taken into account again in determining penalty. Counsel was unable to point to any authority in support of that proposition. It seems to me to be wrong in principle and I reject it.
Whether the breaches were properly distinct or arose out of the one course of conduct
This factor has been dealt with by agreement. It has been agreed that there were four courses of conduct in connection with the underpayments, two overlapping courses of conduct in relation to the record keeping failures which are to be treated as one, and one course of conduct in relation to failures to provide payslips.
The size of the business enterprise involved
The applicant made no written submissions on this point. The respondents submitted that:
The First Respondent was a small business only employing limited numbers of staff in addition to working in the business themselves.
The First Respondent is been (sic) wound up. The Second and Third Respondents will not have any future involvement in the management of a Company or business.
The points raised in the second paragraph have been addressed previously. The applicant accepts that the respondents ran a small business. However, in oral submissions, the applicant submitted that it was irrelevant that the respondents’ business was small. The applicant referred to Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [28] , where Tracey J said:
No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction “must be imposed at a meaningful level”: see Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd [2001] ATPR 41-815 at [13].
That is obviously correct, with respect. As in so many areas, the economies of scale make it easier for large enterprises than for small businesses to provide the necessary resources to ensure compliance with wage regulations. However, compliance with all aspects of the law is not optional. It is essential. Where wages are concerned, the consequence of not complying with the relevant law is a direct and immediate impact on one or more individual workers. In many cases, such workers would be even less able to cope with financial shortfalls than small business owners.
Whether or not the breaches were deliberate
The applicant submitted that:
(a)The Respondents have a significant prior history of complaints made against them in relation to non-compliance with their employment obligations as outlined in the Affidavit of Daniel Tan.
(b)It is submitted on that basis that the Respondents were on notice of their obligations pursuant to the Award and the WR Regs and the consequences of failing to meet them. In the circumstances the Plaintiff submits that the breaches before the Court constitute a deliberate disregard for those requirements.
The respondents submitted that:
The Respondents agree that they did not put in place a robust accounting and entitlements system which would have ensured that they always met the standard required of them. However whilst their actions or inactions are ill advised, the Respondents deny that they intentionally failed to meet their obligations.
The respondents’ accounting system has been discussed above, as has the fact that the breaches in the present case were deliberate.
Whether senior management was involved in the breaches
The applicant submitted that:
(a)The Second and Third Respondents were ultimately responsible for the actions of the First Respondent and were responsible for all material decisions in relation to the payment of Mr Howden.
(b)There is no evidence before the Court that the breaches were attributable to any other person or agent.
The respondents submitted that:
The First Respondent was a small business only employing limited numbers of staff in addition to working in the business themselves. The Second and Third Respondents accept that they were responsible for all material decisions in relation to the payment of Mr Howden.
Clearly, the second and third respondents were the senior management of the first respondent and they were responsible for the breaches in this case.
Whether the party committing the breach had exhibited contrition, corrective action and co-operation with the authorities
The applicant submitted that:
(a)There is no evidence of any genuine contrition shown by the Respondents for their contraventions.
(b)
The Plaintiff made considerable attempts to secure voluntary compliance for the underpayment (paragraphs
36 – 54 of the Agreed Facts).
(c)The Respondents ultimately did pay the amount in full to Mr Howden; however this did not occur until 27 July 2010, which was approximately ten months after they were initially notified of the complaint to the Applicant.
(d)It is further noted that the payment occurred days after the Respondents were provided with a Court Complaint and were advised that the Applicant intended to file proceedings.
(e)The Plaintiff submits that the attitude of the Third Respondent displayed during her contact with the Plaintiff (Affidavit of Clare Hartigan) clearly demonstrates a complete lack of contrition for her conduct and strong contempt towards her employees and the Applicant.
(f)It is submitted on that basis that the payment of the underpayment amount to Mr Howden was an acceptance of the inevitable in the hope that the matter would not proceed further and not a genuine acceptance of wrongdoing.
(g)The Plaintiff further submits that the evidence relating to the Respondent’s history of similar conduct discloses a pattern of non-compliance which has only ceased subsequent to intervention by Fair Work Inspectors; in that on at least 5 previous occasions the Respondents have voluntarily complied and proceedings have not commenced (Affidavit of Daniel Tan).
(h)It is submitted that the voluntary compliance on previous occasions was indicative of a desire to avoid legal proceedings and was not a sign of contrition for the conduct. It did not result in ongoing corrective action in relation to other employees and has not deterred the Respondents from subsequent breaches in relation to other employees.
(i)It is submitted that the conduct in this matter was consistent with that pattern.
(j)However, the Respondents have made full admissions in relation to all of the contraventions alleged in the Applicant’s Statement of Claim and have been cooperative since the proceedings were commenced.
(k)Further, the Respondents have also cooperated in the production of an Agreed Statement of Facts with the Applicant, which has assisted the litigation process and has reduced costs to the public purse.
The respondents submitted that:
The Respondents paid the amount in full to Mr Howden. The Respondents content (sic) that due to their extremely difficult financial circumstances they were unable to quickly pay the amount due to Mr. Howden, and that the delay in payment was due in part to the overall Respondents (sic) financial situation.
The First Respondent is been (sic) wound up.
The Second and Third Respondents do not (sic) and will not be involved in the management of a business or company in the future.
The Respondents have made full admissions in relation to all of the contraventions alleged in the Applicant’s Statement of Claim and have been cooperative since the proceedings were commenced.
The Respondents have also cooperated in the production of an Agreed Statement of Facts with the Applicant.
In oral submissions, the respondents argued that the telephone conversation between Ms Hartigan and the third respondent should be seen in context. The context was said to be that the respondents had resolved to pay the outstanding wages, but they were told, during that conversation, that proceedings would still be brought against them. It was submitted that most people in such a situation would have reacted badly.
That may be true. However, there are orders of magnitude. The third respondent went so far as to say that if she ever saw Mr Howden again she would kill him and she would spit on him in the street. She also said that she had “no fucking rights”.
There was nothing in the evidence of the telephone conversation that indicated that the third respondent had any awareness of or concern for Mr Howden’s rights. There was no hint of an apology and no sign of regret.
The respondents’ counsel suggested that a guilty plea, as it were, should itself be seen as evidence of contrition. Counsel referred to a passage from the decision of Wright J in the Tasmanian Supreme Court’s decision in R v Dowie (1989) 42 A Crim R 234 at [54] where his Honour said:
If, however, it is more comforting to justify mitigation on the basis of contrition and remorse I think such subjective attitudes of mind are more readily inferred from a guilty plea than from protestations from the dock or the bar table.
However, his Honour went on to note the statement of Wells J in R v Shannon (1979) 21 SASR 442 where it was said that a plea of guilty, at one end of the scale:
… may represent a reluctant acknowledgment that no other course is open, wrung from a prisoner who is defiant of all authority and who is a confirmed misanthrope with a dangerous proclivity towards violence, cruelty, or the misappropriation of the property of others.
In all of the circumstances of this case, I consider that the respondents have accepted the allegations made against them because they saw no realistic alternative. I consider that they paid Mr Howden his outstanding wages, albeit 10 months late, because they perceived that the penalties imposed on them would have been very much greater if they had not paid the money. I do not regard the respondents’ acceptance of the allegations or the payment of the outstanding wages as evidence of genuine contrition. However, the payment of the outstanding wages does amount to corrective action.
Counsel for the respondents emphasised that the respondents had gone to considerable expense in engaging lawyers to represent them, and with the assistance of those lawyers had entered into an agreed statement of facts which contained full admissions.
I accept that, since the proceedings commenced, the respondents have been cooperative. Consequently, the cost of this case to the public purse is considerably less than it might otherwise have been. The respondents should be given credit for that.
The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements
The applicant submitted that:
(a)One of the principal objects of the WR Act was the maintenance of an effective safety net and effective enforcement mechanisms. Further, one of the principal objects of the WR Regs is the making and retention by employers of records relating to the employment of employees; which allows for the inspection of records by inspectors and the verification of compliance with legislative requirements.
(b)The substantial penalties set by the legislature for breaches of such minimum entitlements reinforce the importance placed on compliance with minimum standards.
The respondents did not make any written submissions on this point.
I accept that proper records and payslips are essential for the convenient investigation of potential breaches of wage regulations and the enforcement of employee entitlements.
The need for specific and general deterrence
The applicant submitted that:
(a)It is well-established that “the need for specific and general deterrence” is a factor that is relevant to the imposition of a penalty under the WR Act. See for example, Mowbray FM in Pangaea, [26]-[59].
(b)Both specific and general deterrence are of primary concern in the present case.
Specific deterrence
(c)Gray J in Plancor Pty Ltd v Liquor Hospitality and Miscellaneous Union 171 FCR 357 observed at [37]:
"Specific deterrence focuses on the party on whom the penalty is to be imposed and the likelihood of that party being involved in a similar breach in the future. Much will depend on the attitude expressed by that party as to things like remorse and steps taken to ensure that no future breach will occur".
(d)The Plaintiff submits that in this case, the need for specific deterrence is particularly high due to the following factors:
·The Respondents’ previous similar conduct shows that they have demonstrated a long term disregard for their obligations as an employer in relation to a number of employees;
·The resolution of previous complaints and investigations through voluntary compliance has not served to deter the Respondents from further incursions of a similar or identical nature in relation to other employees;
·Evidence of genuine contrition may be indicative of a lesser need for specific deterrence; however in this instance that is completely absent, and instead there is evidence of generalised contempt towards employees and the Applicant (Affidavit of Clare Hartigan).
·Whilst the First Respondent is no longer operating a business that employs staff, the Second and Third Respondents may be in a position to commit further breaches. It is important therefore that they are not left with the impression that it is open for an employer to decide the minimum entitlements of an employee; nor that where a business is not financially viable, that they are justified in taking advantage of their employees to offset that problem.
General deterrence
(a)The role of general deterrence in determining the appropriate penalty is illustrated by the comments of Lander J in Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543, [93].
“In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend: Yardley v Betts (1979) 22 SASR 108. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty: R v Thompson (1975) 11 SASR 217.”
(b)Similarly in CPSU v Telstra Corporation Limited (2001) 108 IR 228 at 230-231 where Finkelstein J said:
“… even if there be no need for specific deterrence, there will be occasions when general deterrence must take priority, and in that case a penalty should be imposed to mark the law's disapproval of the conduct in question, and act as a warning to others not to engage in similar conduct ….”
(c)As well as specific deterrence, the Plaintiff submits that general deterrence is also important in the present case. Regardless of the size of the First Respondent and its financial position, the law should mark its disapproval of the conduct in question, and set a penalty which serves as a warning to others.[9]
(d)There is a need, it is submitted, to send a message to the community at large, and employers particularly, that the correct entitlements for employees must be paid and that steps must be taken by employers (of all sizes) to ascertain and comply with minimum entitlements (as opposed to ignoring those obligations). Compliance should not be seen as the bastion of the large employer, with human resources staff and advisory consultants (accountants, consultants, lawyers) behind them.
[9] See paragraph [25] of Kelly, supra, and the cases cited therein. See also Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 at 559-60 [93] (Lander J).
The respondents submitted that:
The First Respondent is been (sic) wound up.
The Second Respondent is 63 years of age and suffers from a heart condition. He has been advised by his doctor to 'avoid stress, as it could have serious consequences on his health". The Second Respondent has no intention to ever be involved in the management of a company or business in the future.
As a direct result of the failure of the First Respondent it is likely that the Second Respondent will be forced into bankruptcy.
The Third Respondent is receiving a Centrelink retirement pension and has no intention to ever be involved in the management of a company or business in the future.
As a direct result of the failure of the First Respondent it is likely that the Third Respondent will be forced into bankruptcy.
Gray J in Plancor Pty Ltd v Liquor Hospitality and Miscellaneous Union 171 FCR 357 observed at [37]:
Specific deterrence focuses on the party on whom the penalty is to be imposed and the likelihood of that party being involved in a similar breach in the future. Much will depend on the attitude expressed by that party as to things like remorse and steps taken to ensure that no future breach will occur.
In our view, once (sic) considering the financial position of the Company (paragraph 8(f) Agreed Facts), the ages of the Second and Third Respondents and the medical condition of the Second Respondent We submit that there is no likelihood whatsoever of the Respondents been (sic) involved in a similar breach in the future and the winding up of the First Respondent will ensure that no future breach could occur.
In addition to these proceedings before this honorable court, the Respondents have suffered embarrassment and distress as a result of a media release to local media outlets in Bendigo and Victoria outlining the alleged breaches and claims against the three Respondents, which are now the subject of this proceeding.
The Media Release was made on the same day proceedings were issued against the Respondents.
We submit that due to the embarrassment and distress the Respondents have endured, and the fact that public notification has been provided to the community by the media warning employers to ensure that they comply with their obligations or face possible court proceedings, a penalty in respect to general deterrence has been met.
In relation to specific deterrence, for the reasons discussed previously, I do not accept that the respondents have shown any genuine contrition for the breaches they have committed in relation to Mr Howden. On the contrary, the evidence shows that the third respondent at least has considerable contempt for the first respondent’s employees and their lawful entitlements. There is no evidence that either the second or the third respondent has apologised to Mr Howden, or conveyed to anyone any regret for the breaches. The respondents’ admissions and their payment of the outstanding amount to Mr Howden, in my view, are no more than an attempt to minimise the consequences for themselves.
The media attention has no doubt been embarrassing for the second and third respondents. I take it into account in assessing penalty.
As to whether the respondents are likely to be in a position in the future to commit similar breaches, I note that the first respondent has not been put into liquidation and the second and third respondents have not become bankrupt. I am not able to be satisfied on the evidence that none of the respondents will be in a position to commit similar breaches in the future. Consequently, I am not able to conclude that there is no need to impose a penalty partly for reasons of specific deterrence. On the contrary, the respondents’ past history of repeated breaches of workplace laws make specific deterrence an important consideration in this case.
In relation to the question of general deterrence, I do not accept that the media coverage of the allegations against the respondents and the maximum penalties they faced satisfies the requirements of general deterrence in this case. It is necessary for the court, on behalf of our community generally, to mark its disapproval of the respondents’ conduct to discourage similar conduct in others. Having said that, I accept that publicity about this case may to some extent discourage other people from engaging in unlawful actions of the kinds engaged in by the respondents in this case.
Other issues
The respondents raised a number of other arguments at the hearing. They submitted that their delay in paying Mr Howden his correct entitlements was based on advice from their accountant, who said that paying Mr Howden would disadvantage other employees. However, the accountant’s assertions were spurious, and it should have been obvious to the respondents that they were spurious. It is simply unacceptable to suggest that an employer should not pay one worker his correct entitlements because that will make it harder for the employer to pay his other workers their correct entitlements.
The respondents submitted that, in determining penalty, it is appropriate to take into account the amount that they have paid in legal costs in relation to the proceeding. That was done in Pine v Casello Constructions Pty Ltd [2005] FCA 1854 where North J noted that the respondent had spent $8,000 in legal costs and in Furlong v Maxim Electrical Services (Aust) Pty Ltd (No.3) [2006] FCA 1705 where Marshall J noted that the respondent union had expended $80,000 in legal costs.
I would certainly be prepared to take into account in assessing penalty the legal costs expended by the respondents in this case. However, there is no evidence in the present case about the amount of the legal costs that the respondents have incurred. From counsel’s submissions, it seems clear that the respondents’ legal practitioners have not provided their services pro bono. However, I am unable to speculate on the amount of the respondents’ legal costs.
The respondents also relied on the decision of Barnes FM in Longmire v Murray Clarke Enterprises Pty Ltd (2008) FMCA 1028 at [113] to [114]. In that case, her Honour noted that it is proper to avoid double counting where an individual contravenor is the owner of a corporate contravenor. Her Honour reduced the penalty payable by the individual in that case, in view of the penalty that had already been imposed on the corporation.
In the light of that decision, during argument, the court asked counsel whether the financial difficulties of the first respondent, and the prospect of it going into liquidation and being unable to pay any penalty at all, suggested that the penalties imposed on the natural persons should perhaps be higher than they might otherwise have been. At that point, counsel made it clear that the first respondent is not actually in liquidation, and submitted that the case should be dealt with on the basis that the first respondent is still a company in being. Counsel at that point also suggested that the first respondent might still have some trucks that had not been repossessed. I accept that the case should be dealt with on the basis that the first respondent is still a company in being.
The financial circumstances of the respondents have been described as difficult, but there is no evidence before the court about the actual assets and liabilities of the second and third respondents, and only tax returns for the first respondent. There is insufficient evidence before the court for a proper assessment to be made of the respondents’ financial circumstances, and what the consequences for the respondents might be of any particular level of penalty. The respondents’ failure to disclose their full financial circumstances to the court is a curious omission, in circumstances where their financial circumstances have been a focus of their submissions.
Counsel also urged the court to carefully consider the decision of the Magistrates’ Court of Victoria in Joshua Iser v Jumarna Pty Ltd and Ors (unreported) No. X0293692, Magistrate Chambers, 29 February 2009. In that case, her Honour referred to the decision in Longmire and took into account the penalty imposed on the corporate respondent in imposing a lower penalty on the company director.
I accept that, in an appropriate case, it might be appropriate to reduce the penalty imposed on an individual contravenor in view of the penalty imposed on a corporate contravenor, so as to avoid double dipping. However, in other cases, it might be more appropriate to make an adjustment the other way. For example, one might think that the individual contravenor, being the mind behind the corporate contravenor, ought to bear the brunt of any penalty. In another situation, in Australian Competition and Consumer Commission v Dimmeys Stores Pty Ltd (1999) ATPR 41-716; [1999] FCA 1175 at [39], Weinberg J elected to give one of two corporate defendants a lower penalty to avoid double dipping.
In the present case, on the material before the court and mindful of the caution against double dipping, I was attracted to the idea of giving the individual contravenors a penalty of about 40% of the maximum and the corporate contravenor a penalty of about 20% of the maximum. However, on further reflection I consider that the appropriate course is to give all the respondents an approximately equal penalty of about 30% of the maximum penalties, bearing in mind that the maximum penalties for natural persons are considerably less than those for corporations.
Conclusions on penalty
I note that the proper approach in determining penalty is to impose a penalty for each contravention, and then, as a check, to consider whether the aggregate penalty is appropriate for all of the contraventions as a whole: Ponzio v B & P Caelli Constructions Pty Ltd and Ors (2007) 158 FCR 543. Taking into account all of the material before me, I consider that the following penalties should be imposed:
a)for the first respondent:
i)$10,000 for each of the four underpayment breaches; and
ii)$1,750 for each of the record keeping and payslip breaches;
iii)making a total of $43,500;
b)for the second respondent, $2,000 for each of the four underpayment breaches, making a total of $8,000; and
c)for the third respondent:
i)$2,000 for each of the four underpayment breaches; and
ii)$350 for each of the record keeping and payslip breaches;
iii)making a total of $8,700.
In relation to the check that is required by the totality principle, I consider that the aggregate penalties indicated above are appropriate for the whole of the contravening conduct engaged in by each of the respondents. In reaching that conclusion, I am particularly mindful of the respondents’ numerous previous breaches of workplace laws and their lack of any genuine contrition. On the other hand, I am also mindful particularly of the fact that, since the proceedings commenced, the respondents have cooperated with the authorities by engaging lawyers, at some expense to themselves, making full admissions, and providing to the court an agreed statement of facts.
There will be orders requiring the respondents to pay the sums mentioned into the Consolidated Revenue Fund of the Commonwealth of Australia.
I certify that the preceding ninety-six (96) paragraphs are a true copy of the reasons for judgment of Riley FM
Date: 3 December 2010
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