Fair Work Ombudsman v Timi Trading Pty Ltd as Trustee for the Nguyen Vo Trust
[2021] FCCA 527
•17 March 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Fair Work Ombudsman v Timi Trading Pty Ltd as Trustee for the Nguyen Vo Trust [2021] FCCA 527
File number(s): BRG 889 of 2019 Judgment of: JUDGE JARRETT Date of judgment: 17 March 2021 Catchwords: INDUSTRIAL LAW – Commonwealth – compliance and enforcement – civil remedies – pecuniary penalty orders – amount of penalty. Legislation: Fair Work Act 2009 (Cth), ss 44(1), 45, 116, 323, 323(1)(b), 323(2), 535(1), 535(2), 535(4), 539(2), 550(1), 557(1), 712, 718A
Fair Work Regulations 2009 (Cth) regs. 3.32, 3.33(1), 3.36
Restaurant Industry Award 2010 cll 12.3, 28.2
Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157
Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482
Fair Work Ombudsman v Bundaberg Security Pty Ltd [2014] FCCA 592
Fair Work Ombudsman v Hiyi Pty Ltd [2016] FCCA 1634
Fair Work Ombudsman v Skypac Group Pty Ltd & Ors [2020] FCCA 2332
Number of paragraphs: 56 Date of last submission/s: 25 November, 2020 Date of hearing: 25 November, 2020 Place: Brisbane Counsel for the Applicant: Ms Slack Solicitor for the Applicant: Office of the Fair Work Ombudsman Solicitor for the First, Second and Third Respondents: Carter Newell Lawyers Solicitor for the Fourth Respondent: MinterEllison Lawyers ORDERS
BRG 889 of 2019 BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: TIMI TRADING PTY LTD AS TRUSTEE FOR THE NGUYEN VO TRUST (ACN 616 773 605)
First Respondent
TIEN HOANG LE
Second Respondent
MINH VO DUY NGUYEN
Third Respondent
HAMISH WATSON
Fourth Respondent
ORDER MADE BY:
JUDGE JARRETT
DATE OF ORDER:
25 NOVEMBER 2020
THE COURT DECLARES THAT:
1.The First Respondent, contravened the following civil remedy provisions of the Fair Work Act 2009 (Cth) (FW Act):
(a)section 535(1) of the FW Act by failing to make or keep employee records as required by regulations 3.32, 3.33(1) and 3.36 of the FW Regulations;
(b)section 535(4) of the FW Act by making and keeping the Company Employee Lists 1 and 3 and Company Pay Records 1 knowing them to be false or misleading;
(c)section 535(2) of the FW Act by failing to include information in an employee record that was required by regulations 3.33(1), 3.33(2) and 3.36 of the FW Regulations;
(d)section 718A(1)(a) of the FW Act by producing the Company Employee List 3 and the Company Timesheets 2 to Fair Work Inspector (FWI) Natalie Johnson (FWI Johnson) who was exercising powers or performing functions under the FW Act, knowing or being reckless as to whether, the Company Employee List 3 was false or misleading, and being reckless as to whether the Company Timesheets 2 was false or misleading;
(e)section 45 of the FW Act by failing to ensure that each of Nhu (Mary) Nguyen, Nhi Hoang Do, Mira Jirel, Rabin Simkhada, Binita Karki Bhandari, Ethan Tang, Lan Anh Nguyen and Soniya Maharjan (IFA Employees) was better off overall under an IFA, at the time each IFA was made, than each IFA Employee would have been if no IFA had been agreed to, as required by clause 7.3(b) of the Award;
(f)section 45 of the FW Act by failing to detail in each IFA for Mira Jirel, Rabin Simkhada, Binita Karki Bhandari, Ethan Tang, Lan Anh Nguyen and Soniya Maharjan, how each employee was better off overall in relation to the variation of the terms and conditions of their employment as required by clause 7.4(d) of the Award;
(g)section 45 of the FW Act, by failing to specify the date on which each IFA for the IFA Employees commenced, as required by clause 7.4(e) of the Award;
(h)section 45 of the FW Act by failing to enter into written part-time agreements with any of the Part-Time Employees in contravention of clause 12.3 of the Award;
(i)section 45 of the FW Act by failing to keep signed records of the starting and finishing times of Uyen (Eunice) Phan, Manoj Godar and Bipin Silwal, and ensure that those records were signed weekly by each employee pursuant to clause 28.2 of the Award;
(j)section 44 of the FW Act by failing to pay Binita Karki Bhandari for her absence from work on a public holiday as required by section 116 of the FW Act; and
(k)section 323(1)(b) of the FW Act by failing to pay each of the IFA Employees, and each of Ankit Bista, Bipin Silwal and Aakanchhya (Sarah) Basnet, part of the amount payable to them in relation to the performance of work in money.
(together, the Contraventions)
2.The Second Respondent was involved, within the meaning of section 550(1) of the FW Act, in each of the Contraventions by the First Respondent.
3.The Third Respondent was involved, within the meaning of section 550(1) of the FW Act, in each of the contraventions by the First Respondent.
4.The Fourth Respondent was involved, within the meaning of section 550(1) of the FW Act, in the contraventions by the First Respondent of section 323(1)(b) of the FW Act set out in paragraph 1(k) above with respect to Mira Jirel, Rabin Simkhada, Binita Karki Bhandari, Ethan Tang, Lan Anh Nguyen and Soniya Maharjan.
THE COURT ORDERS THAT:
5.Pursuant to section 545(1) of the FW Act, each of the Second and Third Respondents:
(a)within a period of two months of these orders, register with the FWO’s “My Account” portal at and complete the profile including the Award options;
(b)within a further month after the period in order 5(a) above, provide to the FWO their respective ‘My Account’ Customer Reference Numbers; and
(c)within a period of two months of these orders, complete all education courses designed for employers with the FWO’s Online Learning Centre at the event that sale of the Business is not finalised by close of business on 25 November 2020, pursuant to section 545(1) of the FW Act, the First Respondent, Second Respondent and Third Respondent, at their own expense, engage a third party with qualifications in accounting or workplace relations to undertake an audit of compliance with the FW Act and the Award on the following terms:
(a)the audit period will be the period commencing on the date of this order and ending six months after the date of this order (Audit Period);
(b)the audit is to be completed within two months of the end of the Audit Period (Audit Completion Date);
(c)the audit will apply to all employees employed in the Business at any time during the Audit Period (collectively Audit Employees);
(d)according to each Audit Employee’s classification of work, category of employment and hours of work worked during the Audit Period, the audit will assess compliance with the following obligations:
(i)wages and work related entitlements under the Restaurant Award; and
(ii)record keeping obligations in Division 3 or Part 3-6 of the FW Act; and
(e)within 30 days of the Audit Completion Date, the First Respondent will provide to the FWO:
(i)a copy of the audit report which will include a statement of the methodology used in the audit; and
(ii)written details of any contraventions identified in the audit, steps the First Respondent has taken or will take to rectify any identified contravention(s) and the date by when the rectification will occur.
7.In the event that sale of the Business is finalised by close of business on 25 November 2020, in the alternative to the order at paragraph 6 above, pursuant to section 545(1) of the FW Act, the Second Respondent and Third Respondent, at their own expense, engage a third party with qualifications in accounting or workplace relations to undertake an audit of compliance with the FW Act and the Restaurant Award of the café operated by the Second and Third Respondents in Portside on the following terms:
(a)the audit period will be the period 30 November 2020 to 31 May 2021 (Audit Period);
(b)the audit is to be completed within two months of the end of the Audit Period (Audit Completion Date);
(c)the audit will apply to all employees employed in the Business at any time during the Audit Period (collectively Audit Employees);
(d)according to each Audit Employee’s classification of work, category of employment and hours of work worked during the Audit Period, the audit will assess compliance with the following obligations:
(i)wages and work related entitlements under the Restaurant Award; and
(ii)record keeping obligations in Division 3 or Part 3-6 of the FW Act; and
(e)within 30 days of the Audit Completed Date, the Second and Third Respondents will provide to the FWO:
(i)a copy of the audit report which will include a statement of the methodology used in the audit; and
(ii)written details of any contraventions identified in the audit, steps the Second and Third Respondents have taken or will take to rectify any identified contravention(s) and by when the rectification will occur.
8.Pursuant to section 546(1) of the FW Act:
(a)the First Respondent pay pecuniary penalties of $95,000 for committing the Contraventions;
(b)the Second Respondent pay pecuniary penalties of $20,000 for his involvement in the Contraventions;
(c)the Third Respondent pay pecuniary penalties of $20,000 for her involvement in the Contraventions;
(d)the Fourth Respondent pay pecuniary penalties of $4,800 for his involvement in the contraventions by the First Respondent of section 323(1)(b) of the FW Act with respect to six employees;
(e)all pecuniary penalties to be paid within 28 days to the Consolidated Revenue Fund of the Commonwealth.
9.The Applicant have liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
REASONS FOR JUDGMENT
JUDGE JARRETT:
These are the reasons for the orders made in this application on 25 November, 2020.
The applicant seeks the imposition of pecuniary penalties and other orders for certain contraventions of the Fair Work Act 2009 (Cth) by the first respondent, in which the second respondent, the third respondent and in one respect, the fourth respondent were involved for the purposes of s.550(1) of the Fair Work Act.
The first respondent operated Café 63 Chermside, a café located in a shopping centre at Chermside, Brisbane, Queensland. It opened on 22 June, 2017. The second and third respondents, a married couple, held 100% of the shares in the first respondent between them and ran the first respondent’s business. At the time the café opened they were both 25 years of age. The fourth respondent is the owner of the Café 63 brand, was the director of the first respondent for a period of approximately 4 months during its first year of operation and provided information and guidance to the first respondent.
The applicant commenced an investigation into the first respondent’s employment practices at the café on 30 August, 2017. Those investigations resulted in proceedings that were commenced on 11 October, 2019. Following a mediation on 10 July, 2020 the parties reached agreement with respect to all aspects of the proposed civil remedies and have now made common recommendations to the Court.
The Court’s role when dealing with a civil penalty case where the parties have agreed on the penalty is not to simply “rubber stamp” that agreed penalty: Fair Work Ombudsman v Skypac Group Pty Ltd & Ors [2020] FCCA 2332 at [13]-[15]. That said, subject to the Court being satisfied that the proposed penalty is appropriate, it is accepted that it is “highly desirable in practice” for the Court to impose the proposed penalty: Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at [58].
THE CONTRAVENTIONS
The first respondent’s contraventions, as the parties agreed they should be identified for the purposes of this application, are set out in Annexure A to these reasons. The first respondent admits the contraventions as set out in that annexure. The first and second respondents have admitted their involvement in the first respondent’s contraventions of the Fair Work Act as set out in annexure A to these reasons. So too, the fourth respondent in respect of one of the first respondent’s contraventions, namely the contravention of s.323 of the Act for failing to pay employees in money rather than goods.
The contraventions concern breaches of the Fair Work Act arising from the employment of 33 individuals by the first respondent over two separate time periods. They were variously employed by the first respondent between 1 August, 2017 and 30 August, 2017 and 1 November, 2017 and 6 February, 2018. Three were full time employees, 26 were part time employees and four were casual employees. Their duties were varied and ranged across introductory level employees, food & beverage attendants, kitchen attendants and cooks. Their employment was covered by the Restaurant Industry Award 2010.
During her investigation across the first period identified above, the applicant’s officers issued notices to produce records or documents pursuant to s.712 of the Fair Work Act to the first respondent. The first was issued on 30 August, 2017 and it required employment records or documents for the employees for the period from 1 August, 2017 to 30 August, 2017. On 15 September, 2017 the second respondent produced documents by email to the applicant in response to the notice. The documents included:
(a)rosters and timesheets relating to 13 employees;
(b)a staff information sheet relating to 13 employees; and
(c)payroll records relating to 13 employees for the period from 31 July to 27 August, 2017.
On 31 January, 2018 a Fair Work Inspector issued another notice to produce records or documents to the first respondent seeking the same documents as the first notice to produce in order to allow the first respondent additional time to produce full employment records for the period from 1 August, 2017 to 30 August, 2017. On 14 February, 2018 the second and third respondents, on behalf of the first respondent, produced documents which included, relevantly:
(a)staff information relating to 21 employees; and
(b)payroll records in relation to 4 employees.
On 28 February, 2018 the second respondent produced additional documents in response to the 31 January, 2018 notice which included individual flexibility arrangements for two employees.
On 7 March, 2018 a further notice to produce records or documents requiring the first respondent to produce documents or records for the period from 1 November, 2017 to 31 January, 2018 was issued. On 29 March, 2018 the second respondent produced documents which included, relevantly:
(a)a leave report in relation to 33 employees;
(b)timesheets for 35 employees;
(c)IFAs for six employees;
(d)a staff information sheet; and
(e)payroll records in relation to 33 employees for the period from 30 October, 2017 to 28 January, 2018.
On 13 April, 2018 the second respondent produced additional records in response to the 7 March, 2018 notice which included, relevantly, timesheets in relation to 5 employees.
The documents produced in response to the notices to produce showed that the first respondent did not hold or keep many of the employment records and documents required by the Fair Work Act and Regulations. Some of the records were inaccurate in that they did not record rates of pay accurately or record leave balances, amongst other things. The first respondent, and the second and third respondents admit that the first respondent contravened s.535(1) of the Fair Work Act by failing to make and keep employee records prescribed by regulations 3.32, 3.33(1) and 3.36 of the Fair Work Regulations 2009 (Cth). They admit that the failure of those records to include certain prescribed information was a contravention of s.535(2) of the Act.
Further, the first respondent, and the second and third respondents admit that some of the documents produced to the applicant in answer to the notices to produce were knowingly false and misleading in contravention of s.535(4) of the Act and that production of them to a Fair Work Inspector was a contravention of s.718A of the Act.
The first respondent entered into individual flexibility arrangements with some of the employees. The award provided for that to occur. However, the first, second and third respondents admit that the first respondent did not ensure that each of those employees was better off overall under their respective arrangement at the time each arrangement was made, than each employee would have been if no arrangement had been made. Moreover, each individual flexibility arrangement it had with the employees named in the proceedings:
(a)failed to detail in the body of the arrangement how the arrangement resulted in the employee being better off overall in relation to the employee’s terms and conditions of employment; and
(b)did not state in the arrangement the date on which it commenced to operate.
Each of these failures was a contravention of the award and consequently s.45 of the Act.
The first respondent failed to make written agreements with some of its part-time employees. That was a contravention of cl.12.3 of the award. Those agreements that it did make with some part-time employees did not comply with the requirements of cl.12.3 of the award. Those matters represent contraventions of s.45 of the Act.
Clause 28.2 of the award required the first respondent to keep all records of starting and finishing times of an employee covered by an annualised salary arrangement and ensure that the record was signed weekly by the employee. The first respondent failed to do that in respect of three of its employees. That failure was a contravention of s.45 of the Act.
Section 116 of the Fair Work Act required the first respondent to pay its full-time and part-time employees during an absence on a public holiday. It failed to do so in respect of one employee on the Brisbane Show Holiday in 2017. That was a contravention of s.44(1) of the Fair Work Act.
Sub-section 323(1)(b) of the Fair Work Act required the first respondent to pay its employees in money by one, or a combination, of the methods permitted under s.323(2) of the Act. The applicant’s investigation showed that the first respondent paid each of the employees with whom it had an individual flexibility agreement part of the amount payable to them in relation to the performance of work, by providing them with an entitlement to take food and beverages from the business up to a particular value. To pay the employees in that way was not permitted by s.323(2) of the Act and doing so was a contravention of s.323(1)(b) of the Act.
The fourth respondent was responsible for and involved in creating sample employment letters and a template individual flexibility arrangement for the first respondent to use when engaging employees. He provided the templates to the first respondent by email on 9 October, 2017. The template IFA contained terms that were in contravention of the award and the Act and was interpreted by the first, second and third respondents in such a way that they thought that it was lawful for an employee who had such an arrangement to receive part of the amount payable to them in relation to the performance of work by the provision of food and drink.
The sample employment letter and sample IFA were drafted by the fourth respondent from information that he says he found on the Fair Work website. But I was taken to nothing on that website that provided for unlawful provisions such as the one under consideration here to be included in an IFA. Both documents produced by the fourth respondent were templates in the sense that they contained many blank spaces and the first respondent would need to customise and complete the documents in accordance with the employment arrangements negotiated with each individual employee.
It is accepted that the fourth respondent was not involved in any negotiation between the first respondent and its employees in relation to the terms and conditions of their employment. The fourth respondent was also not involved in any negotiation and/or drafting of the IFAs between the first respondent and its employees, save for the provision of the template.
Even though the template IFA provided to the first respondent included a reference to ‘Daily allowance: (meals & drinks to the value of $XX per day)’, the fourth respondent says that he anticipated that the daily allowance for meals would be in addition to, and not in lieu of, an increased base rate of pay and other benefits to compensate the employee for any loss of penalty rates or allowances payable under the award. However the document is not drafted in that way.
All parties accept that the second and third respondents had no business experience in the café and restaurant industry and relied upon the advice and assistance provided by the fourth respondent. In the circumstances, the fourth respondent ought to have taken greater care to ensure that the information provided by him to the first respondent was properly understood.
The fourth respondent admits that he aided, abetted, counselled or procured or was otherwise directly or indirectly knowingly concerned in or party to the first respondent’s contraventions of s.323(1)(b) of the Act because he had supplied the template IFA.
The fine detail of all of these contraventions are outlined in the statement of agreed facts between the applicant and the first, second and third respondents filed 21 August, 2020 and the statement of agreed facts between the applicant and the fourth respondent filed 31 August, 2020. There are great many contraventions of the provisions of the act that I have set out above.
By s.557(1) of the Act, the Court must treat multiple contraventions of certain provisions of the Act which arise out of a single course of conduct and committed by the same person or entity as a single contravention and on that basis determine a single apposite penalty. Further, where multiple contraventions which cannot be dealt with pursuant to s.557(1) of the Act, the Court may nonetheless recognise the commonality or overlap between contraventions and take that into account: see for example Fair Work Ombudsman v Bundaberg Security Pty Ltd [2014] FCCA 592 at [12].
The parties agree that the respondents are entitled to the benefit of s.557(1) of the Fair Work Act in relation to multiple contraventions of each separate obligation under the Award and of s.323 of the Fair Work Act. That approach is reflected in Annexure A. Consistent with the position outlined in Fair Work Ombudsman v Bundaberg Security Pty Ltd the parties agree that there should be no separate penalty in respect of:
(c)contraventions 1, 3 and 4 in Annexure A, because the conduct underlying that contravention substantially overlaps with the conduct the subject of contravention 2;
(d)contraventions 6 and 9 in Annexure A, because the conduct underlying that contravention substantially overlaps with the conduct the subject of contravention 5;
(e)contravention 8 in Annexure A, because the conduct underlying that contravention substantially overlaps with the conduct the subject of contravention 7;
(f)contraventions 11 and 12 in Annexure A, because the conduct underlying that contravention substantially overlaps with the conduct the subject of contravention 10; and
(g)contravention 15 in Annexure A due to the amount of the underpayment and the amount having been repaid to the relevant staff member.
CONSIDERATION
Specific and general deterrence is the primary objective for the imposition of civil penalties: Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (above) at 506, [55]; 513, [79]. The “principal object” of deterrence is achieved where a penalty has the necessary “sting or burden” to secure the specific and general deterrent effects that are the raison d’etre of its imposition: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157 at [116].
The parties agree on the maximum penalty that might be imposed upon the respondents in the circumstances of this case. Subsection 539(2) of the Fair Work Act provides that the Court may impose maximum penalties of $63,000 for each of the first respondent’s contraventions and $12,600 for each of the second to fourth respondents’ contraventions.
Accepting the parties agreed approach to grouping the contraventions, the maximum penalties that the Court could impose are:
(a)$441,000 for the 16 contraventions on the part of the first respondent;
(b)$88,200 for the 16 contraventions on the part of the second and third respondents;
(c)$12,600 for the 1 contravention on the part of the fourth respondent.
General deterrence is an important factor in these proceedings. There is a need to send a message to employers generally and to the café and restaurant industry in particular, that record-keeping contraventions, provision of false and misleading documents to a Fair Work Inspector, breaches of the flexibility term of an award and payment other than in money will not be tolerated by the regulator, the community or the Court. I accept, as do the parties, that there is a need to send a message to all employers in the café and restaurant industry that contraventions of the award and the Fair Work Act are serious and unacceptable and that obligations to workers cannot be avoided or abrogated. The high levels of non-compliance in the café and restaurant industry, including with respect to visa holders, reinforces the need to protect a vulnerable workforce by making it known that conduct of the kind engaged in by the respondents in this case, will not be tolerated.
The first respondent continues to operate the café and the second and third respondents remain involved in the business. The second and third respondents both depose that they own a further café business, Café 63 Portside so specific deterrence has a role to play in these penalties. The fourth respondent continues to own the Café 63 brand. I accept that a penalty should accordingly be fixed at a level which specifically deters the respondents from engaging in further contravening conduct.
The obligation to make and keep employee records is essential to achieving compliance with minimum standards under industrial instruments. The record-keeping obligations imposed by the Fair Work Act and the Fair Work Regulations are directed at ensuring the creation and retention of records that are critical in assessing compliance with Commonwealth workplace laws. When an employer does not make and keep employment records, an effective safety net for employees is difficult to maintain and results in those employees being vulnerable to exploitation. In addition, the effect of this invariably limits or restricts the applicant’s ability to conduct her investigation, including in calculating any underpayment amount. A penalty should be fixed at a meaningful level to promote compliance with the minimum standards to which all national system employees and award covered employees are entitled.
It is a fundamental component of Australia’s workplace relations scheme that employees are entitled to be paid minimum amounts of remuneration commensurate with the level and nature of their work and that they be entitled to receive their remuneration in money. The effect of the respondents’ scheme by which eleven employees were paid for their work in part by way of a meals allowance is problematic for at least two reasons. First, it ties a portion of the affected employee’s income to expenditure at the business. Employees should be free to spend their income as they see fit. Second, if employees do not take advantage of the meal allowance (whether in full or in part) they are not entitled to receive the unclaimed component as cash. Thus, they have not been remunerated for their work at all.
Individual flexibility arrangements are a mechanism for an employer and an employee to vary the terms of an award to meet the genuine needs of the employer, employee or both. The requirement that the employee be better off overall under the IFA protects an employee against exploitation and prevents an employer from using IFAs to “opt out” of award obligations. This is fundamental in protecting the integrity of awards as a safety net. The requirement that IFAs specify how employees will be better off overall and when the arrangement will commence enable an employee who is entering such an agreement with their employer to understand the nature and terms of the deal to which they are agreeing. The parties accept that the first respondent’s IFAs failed to meet these protective requirements, including the most basic requirement that the employees be better off overall. The “bargain” that the employees received in return for giving up all penalty rates was to be paid in most cases a flat rate less than the minimum rate in the Award and in one case a rate well below the relevant penalty rates. The use of an IFA to undercut the minimum conditions of an employee represents a serious contravention of the relevant provisions of the award and the Act.
At the relevant time, the award required written agreements for part-time employees to specify at least the hours worked each day, which days of the week the employee will work and the actual starting and finishing times each day. This provided part-time employees with the reasonable predictability that characterises part time (as distinct from casual) employment and ensured that employers and employees could clearly identify when an employee had worked outside of their agreed hours and would be entitled to overtime pursuant to the award. I accept that the first respondent’s failure to make written part-time agreements and in the case of two employees make compliant written part-time agreements, had the potential to undermine the ability to properly assess employee entitlements.
The requirement to keep records of the starting and finishing times for employees on annualised salaries and to ensure that the records are signed, is to enable an employer to carry out a reconciliation at the end of each year and in the event of a shortfall, for the employee to be paid the difference between the wages earned under the award and the actual amount paid. The first respondent’s failure to comply with these requirements for three employees on annualised salaries undermined the employee protections that formed a critical part of the annualised salary provisions.
The contravening conduct in this matter spans two periods, namely August, 2017 and 1 November, 2017 to 6 February, 2018. The offending conduct involves a failure to maintain a system or routine by which the working hours, remuneration and conditions of employees were properly documented by the first respondent, resulting in the first respondent:
(a)making and keeping false or misleading records;
(b)providing documents to a Fair Work Inspector knowing the documents were false or misleading;
(c)failing to make or make compliant written part-time agreements with its part-time employees; and
(d)failing to comply with record keeping requirements for annualised salary employees.
The contravening conduct also involves the first respondent entering into IFAs with eight employees which did not result in the employees being better off overall. The first respondent paid the eight employees on IFAs and an additional three employees for their work in part by way of a meals allowance.
The contraventions took place against a background where:
(a)the business had opened on 22 June, 2017 and the first respondent and its controllers, the second and third respondents, were inexperienced in the café and restaurant industry and in the employment of staff. The respondents emphasise this point;
(b)the business opening had not gone as planned and had been disorganised in many respects;
(c)the second and third respondents relied upon the fourth respondent for advice and information about how to run the business;
(d)seven employees were aged 19 or 20 years during the relevant periods; and
(e)32 of the 33 employees caught up in the contraventions was a foreign national resident in Australia on one or more types of visa.
Ignorance of the law is no excuse for non-compliance. The first, second and third respondents took no steps to verify their understanding of the information provided to them by the fourth respondent or to seek other independent advice as to the appropriateness of their employment practices.
The fourth respondent has over ten years’ experience in the café and restaurant industry. The first, second and third respondents had no business experience in the café and restaurant industry, a fact that was either known to, or should have been obvious to the fourth respondent. He knew that they were relying upon his advice and assistance. The fourth respondent charged the first respondent a “Training and Mentoring Fee” of 5% of the gross sale figure each week plus GST for the support and assistance in the establishment of the business that he provided. Since June, 2017 those fees paid to the fourth respondent have totalled approximately $700,000. In the circumstances, I accept the applicant’s submission that the fourth respondent ought to have taken greater care to ensure that the information provided by him to the first respondent was accurate, complete, compliant with relevant legal requirements and properly understood. It seems, from his own evidence that he did not pay much attention to that. In paragraphs 19 and 20 of his affidavit filed on 25 September, 2020 the fourth respondent swears that:
19. I have always done my best to ensure that any business reflecting the Café 63 brand complies with all applicable laws including the Fair Work Act 2009 (Cth) (FW Act) even though I do not operate the majority of the relevant cafes. It was for this reason that I provided the template documents to Café 63 Chermside even though I was not involved in the day to day employment arrangements.
20. After I was made aware of the Fair Work Ombudsman’s concerns about Café 63 businesses and their compliance with the FW Act, I entered into an agreement with a Workplace Relations Firm to provide support and guidance to Café 63 businesses.
I accept that the contraventions were deliberate to the extent that they were not borne of oversight or inadvertence. On the evidence, the first respondent took no steps to implement any proper record keeping system in relation to employee entitlements when the business was established. It entered into the IFAs by which it was intended that certain employees’ meal allowances would be incorporated into their remuneration, in lieu of penalty rates and other entitlements. It provided false or misleading documents to the applicant and her inspector when, by compulsion of law, it was required to provide documents and information to her.
Whilst the first respondent’s contraventions and the involvement of the second and third respondents in them was not malicious, I accept that there is no excuse for the lack of structure and organisation in the approach the first respondent had to its duties as an employer.
The fourth respondent was only involved in one of the contraventions, namely the failure by the first respondent to pay six employees engaged on IFAs part of the amount payable to them in relation to the performance of work, in money. In respect of that contravention, the applicant accepts that the fourth respondent’s involvement was limited to the creation of a template IFA and the circulation of same to the first respondent. The fourth respondent admits that he was wilfully blind to the fact that the first respondent adopted a practice of paying employees covered by IFAs, in the form of the template IFA, as adapted by the first respondent, part of the amounts payable to them in relation to the performance of work other than in money.
The size and financial circumstances of a respondent “does not exculpate conduct by employers contravening the Act”: Fair Work Ombudsman v Hiyi Pty Ltd [2016] FCCA 1634 at [47]. However, it may be a relevant consideration in determining the appropriate penalty where appropriate evidence is tendered to demonstrate the financial capacity of a respondent to bear a penalty and whether a proposed penalty is likely to be crushing. Small businesses have to meet the same obligations as larger business. The size of the business or its capacity to pay a penalty is of less relevance to the objective of general deterrence as that objective is not centred on whether the penalties imposed can be paid; rather, it is focused on imposing a penalty that will deter other companies from similar contravening conduct in the future. I accept that in the circumstances of this case, the relatively small size of the first respondent (and the business it engages in) cannot properly be invoked as a matter that the court should take into account in mitigation of penalty, although it is a matter which necessarily should be reflected in the size of the penalty to be imposed lest it be concluded that the penalty is crushing.
There is no doubt that the second and third respondents were heavily involved in the contravening conduct. The first respondent acted through the agency of the second and third respondents.
The first, second and third respondents were cooperative in speaking with the applicant’s inspectors and responding to emails throughout the investigation. However, in the course of the applicant’s investigation, documents were provided to the applicant which contained false or misleading information in further contravention of the Fair Work Act. The second and third respondents explain that they gave false documentation to the applicant because they were “afraid”. However, I accept that this explanation does not mitigate their conduct and suggest that their actions were taken so as to protect themselves from what they considered to be serious consequences arising from the conduct.
By admitting the contraventions, each of the respondents have reduced the cost and complexity of the proceedings and I accept that their admissions demonstrate a willingness to take responsibility for their actions. Moreover, the second and third respondents have expressed contrition. The second respondent says that he is now ensuring all of the first respondent’s records are kept up to date. He says that staff are paid all their entitlements. In respect of the meal allowance, this is now provided in addition to hourly rates of pay. The small underpayment that arose as a result of the non-compliance by the first respondent with its obligations, has been rectified.
The parties consent to an order for an audit of the first respondent’s employment practices to take place in 6 months time. That will provide the applicant with assurances that the corrective action outlined in the second respondent’s affidavit has been sustained.
AGREED PENALTIES
The parties have agreed that appropriate pecuniary penalties for each of the respondents are as follows:
(a)$95,000 in respect of the first respondent;
(b)$20,000 in respect of the second respondent;
(c)$20,000 in respect of the third respondent; and
(d)$4,800 in respect of the fourth respondent.
I accept and I find that these penalties are commensurate with their contravening conduct and properly reflect the particular circumstances of this case.
I accept that the training and audit orders agreed between the parties will go some way towards guarding against the risk represented by the second and third respondents’ inexperience in operating a business such as that conducted by the first respondent. They will do so by providing support and oversight to the first, second and third respondents as they continue to operate, and be involved with, the business.
I accept that the agreed penalties are within the Court’s power and are appropriate.
I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Jarrett delivered on 17 March, 2021. Associate:
Dated: 17 March, 2021
ANNEXURE A
Description of contravention
Maximum penalty
Penalty with 20%
discount
Proposed penalty range
Comment
% % Amount 1
s535(1) Failing to make and keep records of start date (reg 3.32(e))
$31,500
No separate penalty sought
2
s535(1) Failing to make and keep records of rate of remuneration (reg 3.33(1)(a)) (Conduct in Contravention Period 2)
$63,000
$50,400
30
40
$15,120
$20,160
Single penalty sought for all contraventions of s535(1)
3
s535(1) Failing to make and keep records of rate of remuneration (reg 3.33(1)(a)) (Conduct in Contravention Period 1) $31,500
No separate penalty sought 4
s535(1) Failing to make and keep records of annual leave and personal/carer's leave (reg 3.36(1))
$31,500
No separate penalty sought
5
s535(4) Making and keeping false or misleading records re hourly rate (Employee Lists 1 and 3)
$63,000
$50,400
20
30
$10,080
$15,120
Single penalty sought for all contraventions of s535(4)
6
s535(4) Making and keeping false or misleading records re amount paid (Company Pay Records 1)
$63,000
No separate penalty sought
7
s718A Providing false records (Employee List 3)
$63,000
$50,400
30
40
$15,120
$20,160
Single penalty sought for all contraventions of s718A
8
s718A Providing false records (Timesheets 2)
$63,000
No separate penalty sought
| Description of contravention | Maximum penalty | Amounts | Penalty with 20% discount | Proposed penalty range | Comment | ||||
| % | % | Amount | |||||||
| 9 | s535(2) Failing to include in an employee record information prescribed by the Fair Work Regulations | $63,000 | n/a | No separate penalty sought, recognising overlap with contraventions of s535(4) | |||||
| 10 | s45 Failing to ensure that employees were better off overall under the IFA (clause 7.3(b)) | $63,000 | n/a | $50,400 | 70 | 80 | $35,280 | $40,320 | Single penalty sought for all contraventions of cl.7 of the Award |
| 11 | s45 Failing to detail how the IFA resulted in the employee being better off overall (clause 7.4(d)) | $63,000 | n/a | No separate penalty sought | |||||
| 12 | s45 Failing to detail the start date of the IFA (clause 7.4(e)) | $63,000 | n/a | No separate penalty sought | |||||
| 13 | s45 Failing to make part time agreements (clause 12.3) | $63,000 | n/a | $50,400 | 20 | 30 | $10,080 | $15,120 | |
| 14 | s45 Failing to keep records of starting and finishing times and ensure that records were signed (annualised salary requirements) (clause 28.2) | $63,000 | n/a | $50,400 | 20 | 30 | $10,080 | $15,120 | |
| 15 | s44 Failing to pay on a public holiday (s116) | $63,000 | $78.12 | No penalty sought | |||||
| 16 | s323 Failing to pay employees in money | $63,000 | n/a | $50,400 | 60 | 70 | $30,240 | $35,280 | |
| TOTALS | $913,500 | $78.12 | $352,800 | 36 | 46 | $126,000 | $161,280 | ||
| TOTALITY 30% discount | $88,200 | $112,896 | |||||||
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