Fair Work Ombudsman v Sun Sea Equity Pty Ltd
[2021] FCCA 104
•27 JANUARY 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Fair Work Ombudsman v Sun Sea Equity Pty Ltd [2021] FCCA 104
File number(s): BRG 1016 of 2019 Judgment of: JUDGE JARRETT Date of judgment: 27 January 2021 Catchwords: INDUSTRIAL LAW – Commonwealth – compliance and enforcement – civil remedies – pecuniary penalty orders – assessing penalty – admitted contravention.
INDUSTRIAL LAW – Commonwealth – compliance and enforcement – civil remedies – pecuniary penalty orders – amount of penalty – particular cases.
Legislation: Fair Work Act 2009 (Cth), ss., 539(2), 546, 546(2), 550(2), 716, 716(2), 716(4A), 716(4B), 716(5) Cases cited: Australian Building and Construction Commissioner v CFMMEU [2020] FCA 549
Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157
CFMMEU v ABCC (2018) 264 FCR 155
Commonwealth of Australia v Director of the FWBII (2015) 258 CLR 482
Fair Work Ombudsman v Blu Hornsby Pty Ltd [2016] FCCA 1150
Fair Work Ombudsman v Nobrace Centre Pty Ltd & Anor (No. 2) [2019] FCCA 2144
Number of paragraphs: 30 Date of last submission/s: 4 August 2020 Date of hearing: By written submission Place: Brisbane Solicitor for the Applicant: Office of the Fair Work Ombudsman Solicitor for the Respondents: HW Litigation ORDERS
BRG 1016 of 2019 BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: SUN SEA EQUITY PTY LTD (ACN 610 861 795)
First Respondent
NATASHA DOUMANI
Second Respondent
ORDER MADE BY:
JUDGE JARRETT
DATE OF ORDER:
27 JANUARY 2021
BY CONSENT THE COURT DECLARES THAT:
1.Sun Sea Equity Pty Ltd contravened s.716(5) of the Fair Work Act 2009 (Cth) by failing to comply with a compliance notice given to Sun Sea Equity on 4 September, 2019.
2.Natasha Doumani was involved, within the meaning of s.550(2) of the Fair Work Act 2009 (Cth), in the contravention by Sun Sea Equity of s.716(5) of the Fair Work Act 2009 (Cth).
AND THE COURT ORDERS BY CONSENT THAT:
3.Pursuant to s 546(1) of the Fair Work Act 2009 (Cth):
(a)Sun Sea Equity pay a pecuniary penalty of $16,000 to the Commonwealth for the contravention set out in paragraph 1 above within 180 days of this order; and
(b)Ms Doumani pay a pecuniary penalty of $3,000 to the Commonwealth for her involvement (within the meaning of s.550(2) of the Fair Work Act 2009 (Cth)) in the contravention referred to in paragraph 2 above within 60 days of this order.
REASONS FOR JUDGMENT
JUDGE JARRETT:
By way of a statement of agreed facts filed on 5 June, 2020 the respondents admit that the first respondent, Sun Sea Equity Pty Ltd, contravened s.716(5) of the Fair Work Act 2009 (Cth) and that the second respondent, Natasha Doumani, was involved in Sun Sea Equity’s contravention, for purposes of s.550(2) of the Fair Work Act. The applicant, seeks declarations and the imposition of pecuniary penalties against Sun Sea Equity and Ms Doumani, for the admitted contravention.
Sun Sea Equity operates a cafe located in Broadbeach, Queensland. It employed two casual employees, Ms Danielle Devine and Ms Eugenia Denich, to work at the cafe from 1 June, 2016 to 2 April, 2019 and 10 April, 2019 to 22 April, 2019 respectively. The employees were young. Ms Devine was between 25 and 27 years old and Ms Denich was 24 years old during their respective employment periods.
In April, 2019 a Fair Work Inspector commenced an investigation into Sun Sea Equity. After conducting the investigation and forming a belief that Sun Sea Equity had contravened provisions of the Restaurant Industry Award 2010, on 4 September, 2019 the Fair Work Inspector gave a compliance notice issued pursuant to s.716(2) of the Act to the company. The notice asserted non-compliance with various wage-related obligations arising under the Retail Industry Award in respect of each employee.
The power of a Fair Work Inspector to issue a compliance notice under s.716(2) of the Fair Work Act provides a mechanism for dealing with non-compliance with minimum entitlements arising under the Act or an award as an alternative to commencing litigation for each underlying contravention. According to s.716(5) of the Act, a person must not fail to comply with a compliance notice. Compliance notices provide a mechanism for the efficient and cost-effective rectification of identified contraventions of the Fair Work Act, including underpayments to employees: see for example, Fair Work Ombudsman v Nobrace Centre Pty Ltd & Anor (No. 2) [2019] FCCA 2144 at [19]; Fair Work Ombudsman v Blu Hornsby Pty Ltd [2016] FCCA 1150 at [29]. If Sun Sea Equity had complied with the compliance notice:
(a)the applicant would have been prevented from bringing civil remedy proceedings against it in respect of the underlying contraventions: s.716(4A) of the Act; and
(b)it would not be taken to have admitted or contravened the civil remedy provisions in respect of the underlying contraventions: s.716(4B) of the Act.
Thus, there are considerable benefits to employers, employees, the Regulator and the public that flow from the use of the compliance notice procedure. However, failure to comply with a compliance notice allows a Fair Work Inspector to bring civil remedy proceedings against the recipient of the notice and seek appropriate orders to remedy the contravention, including pecuniary penalties: s.539(2) of the Act.
The compliance notice issued in this case required Sun Sea Equity to take specified action by 2 October, 2019 to remedy the contraventions identified by the investigation. Sun Sea Equity was required to produce reasonable evidence to the applicant of its compliance with the notice by 8 October, 2019. The notice required Sun Sea Equity to identify the hours worked by and amounts paid to each employee, to calculate and rectify the outstanding amounts owing to each of them and the superannuation payable to them in respect of those amounts. It required Sun Sea Equity to prepare a schedule of calculations and amounts paid to the employees to remedy any identified underpayment.
On 3 October, 2019 Sun Sea Equity’s solicitors provided information to the Fair Work Inspector who issued the notice in partial compliance with the notice. Although Sun Sea Equity produced a schedule of calculations to the applicant and evidence of a payment made to Ms Denich on 3 October, 2019 the schedule was incorrect. It did not include amounts owed to Ms Denich for working on two public holidays (19 April, 2019 and 20 April, 2019), a Saturday (13 April, 2019) and a Sunday (14 April, 2019). Despite these errors being brought to the company’s attention on 3 October, 2019 Sun Sea Equity failed to produce an amended schedule of calculations in respect of Ms Denich. Further, it failed to make any payments to Ms Devine at all. It also failed to make any payments in respect of the employees’ superannuation.
On 17 October, 2019 Sun Sea Equity’s solicitors provided written submissions to the Fair Work Inspector who issued the compliance notice setting out its reasons as to why it had not satisfied the compliance notice.
On 12 May 2020, Sun Sea Equity produced an amended schedule of calculations to the applicant which identified unpaid superannuation amounts of $2,873.11 for Ms Devine and $147.49 for Ms Denich which remained outstanding and a total underpayment to the each employees as follows:
(a)for Ms Devine, a total underpayment of $30,243.29; and
(b)for Ms Denich, a total underpayment of $1,552.50, of which $1,337.22 was outstanding as at 12 May, 2020.
The applicant accepts that Sun Sea Equity has now undertaken the following steps required by the compliance notice:
(a)it has calculated the outstanding entitlements it was required to pay the employees, including superannuation; and
(b)it has prepared and produced to the applicant, a schedule outlining its calculation of the outstanding entitlements it was required to pay the employees.
As at the date of the hearing before me, the total outstanding underpayment amount was $20,580.51.
Sun Sea Equity has now taken steps to rectify the underpayments and the amounts due to the employees were paid to the applicant by 17 November, 2020 and the applicant has now distributed the underpaid amounts to the employees.
ASSESSMENT OF PENALTY
The Court may impose penalties pursuant to s.546 of the Fair Work Act if it is satisfied that a person has contravened a civil remedy provision. Section 716(5) of the Fair Work Act, the section of the Act at issue here, is a civil remedy provision.
There is only a single contravention of s.716(5) of the Act by each of the respondents relating to the failure to comply with the compliance notice issued on 4 September, 2019.
The parties agree that pursuant to ss.539(2) and 546(2) of the Fair Work Act, the maximum penalty that the Court may impose on Sun Sea Equity and Ms Doumani for their contraventions of s.716(5) is $31,500 and $6,300 respectively.
Deterrence, both specific and general, is the “principal and indeed only” objective of pecuniary penalties under the Fair Work Act: Commonwealth of Australia v Director of the FWBII (2015) 258 CLR 482 at 506 [55]; CFMMEU v ABCC (2018) 264 FCR 155 at 167 [19]; Australian Building and Construction Commissioner v CFMMEU [2020] FCA 549 at [26]. Retribution, denunciation and rehabilitation have no part to play.
The penalty in this case must be set at a level such that it would be likely to act as a deterrent in preventing similar contraventions by like-minded persons. It must have the necessary “sting or burden” to secure “the specific and general deterrent effects that are the raison d’être of its imposition”: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157 at [116]. I accept that this is especially important in cases of this type involving employees in the restaurant and hospitality industry where non-compliance with minimum wages requirements is notorious.
The parties agree that Ms Doumani was at all material times the sole director of Sun Sea Equity and responsible for ensuring that Sun Sea Equity complied with its legal obligations under the Fair Work Act. It took Sun Sea Equity a significant period to fully rectify its non-compliance with the compliance notice despite being given various opportunities and time to do so. I accept that the respondents’ conduct can and should be seen as a deliberate failure to comply with the compliance notice. The respondents’ non-compliance is serious and, I accept, demonstrates a disregard for their obligations under the Fair Work Act and the authority of the applicant as a regulator of Commonwealth workplace laws.
I have taken into account that on 2 October, 2019 the respondents’ solicitors told the Fair Work Inspector that issued the compliance notice that the first respondent was preparing schedules as required by the notice and that it expected to provide further information later that week. I have also taken into account that on 3 October, 2019 the respondents’ solicitors provided information in partial compliance with the notice and evidence of that compliance. On 17 October, 2019 the respondents’ solicitors provided written submissions to the Fair Work Inspector that issued the compliance notice as to the reasons why the first respondent did not comply with the notice, namely:
(a)the first respondent was suffering from severe financial hardship;
(b)the first respondent was trading at a loss;
(c)the first respondent was in dispute with its landlord in respect of the lease from which its business was operated which was causing the first respondent further distress and loss; and
(d)as a result of those matters, the first respondent had no available funds (or other means) to pay monies that were owing to the employees.
These proceedings are a direct result of the respondents’ failure to comply, or to cause the first respondent to comply, with the compliance notice. As a result of Sun Sea Equity’s failure to comply with the compliance notice, the applicant has been required to commence these proceedings. More importantly, the employees have not received the full benefit of the action that Sun Sea Equity was required to take, or the full amounts owing to them until the underpayments were rectified in November, 2020.
Sun Sea Equity has not previously been the subject of court proceedings by the applicant for contraventions of workplace laws. Nor has Ms Doumani.
The obligation to comply with the Fair Work Act and, in particular, s.716 falls just as heavily on small corporations and small businesses – and individuals, for that matter – as it does on large employers or businesses. Put shortly, one cannot shirk one’s responsibilities imposed by law simply because one might be described as a “small business” or because the business is of a particular size. It is incumbent on all employers to comply with the requirements of the Fair Work Act.
I accept that the respondents have co-operated in these proceedings and made early admissions of the contravention. This has saved the parties and the Court the time, cost and effort associated with a contested trial. The respondents have co-operated by making admissions and agreeing to the allegations in the statement of claim, which includes the facts establishing the contraventions. The respondents have also agreed the process to be adopted for the determination of the matter as against them. The utility of that co-operation ought to be reflected in a discount in the penalty imposed for the contraventions. I have taken that into account.
There has been, however, no expression of remorse or contrition by the respondents. An expression of contrition is most clearly seen by the way that a respondent has taken steps to correct its wrongdoing and change its behaviour. Here, Sun Sea Equity did not comply with the compliance notice at the time compliance was due and full rectification of the underpaid amounts took some time. The respondents have not apologised for their unlawful conduct. The admissions in the proceedings should be seen as nothing more than an acceptance of the inevitable result of them. I do not accept that the respondents’ early admission of liability reflects contrition and remorse. A discount is appropriate to take into account the early admissions of liability but the discount is not significant in the circumstances.
The failure to comply with a notice properly issued by the applicant is serious. The efficacy of statutory notices such as compliance notices will be hindered if recipients perceive that a failure to comply carries no meaningful consequences. The power to issue a compliance notice is an important tool available to Fair Work Inspectors and compliance with such notices avoids the need for litigation or the imposition of any penalties. Ordering penalties at a meaningful level for a compliance notice contravention allows a court to demonstrate that there are serious consequences for failing to comply with a compliance notice.
The applicant submits that general deterrence is of particular importance due to the poor compliance record of the fast food, restaurant and cafe industry. The evidence demonstrates that over the past two years, the fast food, restaurant and cafe industry has accounted for 13.7% of all the applicant disputes and, of those, 47.1% related to workers between the ages of 15 and 25, and 37% related to wages and conditions, including underpayment of wages, penalty rates and overtime. Similarly, between July, 2013 and June, 2016 the fast food, restaurant and cafe industry accounted for 11% of all fair work disputes, the highest of any industry and young workers between the ages of 15 to 29 represented 60.7% of the Industry.
I accept that the purpose of specific deterrence is low. I accept Ms Doumani’s unchallenged evidence that as a result of the investigation in this case, she has taken advice from lawyers and accountants. She has identified how to correctly calculate the amount of entitlements (ordinary earnings, overtime or other penalty earnings and applicable superannuation) to be paid to employees of Sun Sea Equity. She has taken advice as to how to correctly apply the relevant award. Ms Doumani deposes to being confident that Sun Sea Equity now pays all entitlements to its employees as required by the award. I accept her evidence about that.
Ms Doumani deposes that the first respondent is in a poor financial position and that has been made worse by the COVID-19 pandemic. These matters are not relevant however, because the failure to comply with the award predated the COVID-19 pandemic, as did the issue of the compliance notice.
CONCLUSION
Fixing a penalty in this case requires the Court to ensure that the relevant compliance notice regime established by the Fair Work Act is met and that the regime is an effective means of ensuring compliance with the Act. Employers and others who receive such notices should be under no misapprehension about what is required of them. Having said that, the penalty must be fixed such that it is proportionate to the gravity of the contravening conduct. I have described the conduct above. Whilst it is objectively serious, it falls at the lower end of the scale.
Having regard to the matters I have referred to above, I fix a penalty for the first respondent in respect of the single contravention of s.716(5) of the Fair Work Act of $16,000. I fix a penalty for the second respondent in respect of the single contravention of s.716(5) of the Fair Work Act (which she is taken to have committed by reason of s.550(1) of the Act) of $3,000.
I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Jarrett delivered on 27 January, 2021. Associate:
Dated: 27 January 2021
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