Fair Work Ombudsman v Tolu Investors Pty Ltd
[2023] FedCFamC2G 773
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Tolu Investors Pty Ltd [2023] FedCFamC2G 773
File number(s): SYG 677 of 2022 Judgment of: JUDGE MANSINI Date of judgment: 24 August 2023 Catchwords: INDUSTRIAL LAW – FAIR WORK – application for pecuniary penalties – where First Respondent employer failed to comply with compliance notice and Second Respondent was involved – where contraventions of ss.716 and 550 of the Fair Work Act 2009 (Cth) were admitted and declarations made – consideration of relevant factors – penalties determined. Legislation: Fair Work Act 2009 (Cth) ss.99, 539, 545, 546, 550, 716, 793(1)
Restaurant Award 2020
Restaurant Industry Award 2010
Cases cited: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
Australian Building and Construction Commissioner v Pattinson [2019] FCA 1654
Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25
Australian Opthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8
CFMMEU v ABCC [2018] FCAFC 97
Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482
Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53
Markarian v The Queen [2005] HCA 25
Trade Practices Commission v CSR Ltd [1990] FCA 762
Wong v The Queen [2001] HCA 64
Division: Division 2 General Federal Law Number of paragraphs: 86 Date of hearing: 22 August 2023 Place: Parramatta Counsel for the Applicant: Ms C Bembrick Solicitor for the Applicant: Fair Work Ombudsman The First Respondent: Appearance by the Second Respondent in person The Second Respondent: Litigant in person ORDERS
SYG 677 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: TOLU INVESTORS PTY LTD (ACN 612 526 057)
First Respondent
GRANT CHRISTOPHER GOLDSMITH
Second Respondent
order made by:
JUDGE MANSINI
DATE OF ORDER:
24 AUGUST 2023
THE COURT DELCARES THAT:
1.The First Respondent contravened s.716(5) of the Fair Work Act 2009 (Cth) (Act) by failing to comply with the Compliance Notice issued on 11 November 2021.
2.The Second Respondent was involved in the contravention by the First Respondent of s.716(5) of the Act, pursuant to s.550 of the Act.
THE COURT ORDERS THAT:
1.Pursuant to s.546(1) of the Fair Work Act 2009 (Cth) (Act):
(a)the First Respondent pay a pecuniary penalty of $7,992 for the contravention of s.716(5) of the Act; and
(b)the Second Respondent pay a pecuniary penalty of $1,998 for his involvement in the First Respondent’s contravention of s.716(5) of the Act.
2.Pursuant to s.546(3)(a) of the Act, the pecuniary penalties ordered against the Respondents set out in Orders 1(a) and 1(b) herein, are to be paid to the Consolidated Revenue Fund of the Commonwealth within 28 days.
3.The Fair Work Ombudsman have liberty to apply on 7 days’ notice in the event that any of the preceding orders are not complied with.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE MANSINI
INTRODUCTION
This is an application by the Fair Work Ombudsman (FWO) in relation to a restaurant business that did not comply with a statutory notice.
The notice was issued following investigation of a report by a former employee which led the inspector to believe that there had been underpayments in contravention of the minimum conditions in the legislation and modern award. The restaurant and its executive chef denied the underlying contraventions but accepted they had not complied with the notice.
The FWO asked the Court to make declarations of the admitted contraventions of the Fair Work Act 2009 (Cth) (Act) by Tolu Investors Pty Ltd (ACN 612 526 057) (First Respondent) and, for his involvement, Mr Grant Christopher Goldsmith (Second Respondent). The FWO also sought the imposition of pecuniary penalties.
These reasons explain the relief that has been ordered by the Court.
CONTEXT
The following factual context was either agreed or not disputed and constitutes findings I have made.
The FWO is (and was at all relevant times) a statutory appointee of the Commonwealth appointed by the Governor-General by written instrument pursuant to s.687(1) of the Act; a Fair Work Inspector pursuant to s.701 of the Act; and a person with standing to bring these proceedings and to apply for orders for contraventions of civil remedy provisions pursuant to s.539(2) of the Act.
The First Respondent is, and was at all relevant times, a registered company (ACN 612 526 057) that is incorporated under the Corporations Act 2001 (Cth). At all relevant times, the First Respondent was: a constitutional corporation within the meaning of s.12 of the Act; and a national system employer within the meaning of s.14 of the Act.
From around November 2016, the First Respondent operated a restaurant business trading as “Spinnakers Brasserie” at the Gosford Sailing Club in Point Frederick, in the state of New South Wales. At any given time, the First Respondent employed approximately 15 to 20 employees to work in its restaurant business.
The Second Respondent was at all relevant times Executive Chef of Spinnakers Brasserie with authority to deal with any employee of that business and responsibility for ensuring the First Respondent complied with its legal obligations under the Act. The Second Respondent is and was a person whose conduct, engaged in on behalf of the First Respondent and within the scope of his actual or ostensible authority, is taken to be that of the First Respondent pursuant to s.793(1) of the Act.
On or around 30 March 2018, a Mr Shahnawaz Faridi (former employee) commenced employment for the First Respondent at Spinnakers Brasserie. The former employee was sponsored under an immigration visa.
On 26 May 2018, the Second Respondent was appointed director of the First Respondent company.
On 2 May 2019, the former employee emailed the Second Respondent requesting a pay rise to in which he explained his difficulties with personal expenses and claimed he was not able to survive. And, on 1 February 2020, the former employee again emailed the Second Respondent requesting the Second Respondent to increase his pay in which he asked that the Second Respondent consider his circumstances as he had a family. In cross-examination, the Second Respondent maintained that the former employee was content with his pay including because he was approved a pay rise at one point.
On 10 November 2020, the Second Respondent was removed as director of the First Respondent company.
In September 2021, Spinnakers Brasserie was forced to close due to the global COVID-19 pandemic and related Government restrictions and did not reopen.
On or around 24 September 2021, the FWO received a request for assistance from the former employee. This prompted a Fair Work Inspector Christine Cox (appointed to that role under s.700 of the Act, Fair Work Inspector Cox) to conduct an investigation of the First Respondent with respect to the former employee’s employment.
As a result of the investigation, Fair Work Inspector Cox formed a belief that, between 30 March 2018 and 1 June 2021:
(a)the First Respondent employed the former employee as a full-time employee at the business;
(b)the following modern awards under the Act covered and applied to the First Respondent in respect of its employment of the former employee:
(i)the Restaurant Industry Award 2010 (2010 Award) until 2 June 2020; and
(ii)the Restaurant Award 2020 (2020 Award) from 3 June 2020;
and the former employee:
(c)was classified as a Cook grade 5 under each of the 2010 Award and the 2020 Award;
(d)was paid between $18.27 and $20.68 per hour, which was insufficient to satisfy the minimum wage during the Contravention Period for a full-time Cook grade 5 under the 2010 Award and 2020 Award, which was between $23.23 and $25.20 per hour;
(e)was unfit for work because of an injury to his hand, for a total of 20 hours, when he would ordinarily have been working between 26 March 2021 and 29 March 2021 inclusive, and was therefore entitled to paid personal leave for those 20 hours; and
(f)was not paid for the 20 hours of personal leave.
Accordingly, Fair Work Inspector Cox also formed a belief that the First Respondent had contravened: s.99 of the National Employment Standards in the Act (NES); cl.20.1 of the 2010 Award; and cl.18.1 of the 2020 Award.
On 11 November 2021, Fair Work Inspector Cox gave the First Respondent a compliance notice in respect of this belief, pursuant to s.716(2) of the Act (Notice). The Notice met the requirements of s.716(3) of the Act and required the First Respondent to take a range of specified actions to calculate and remedy the direct effects of the identified contraventions and keep a record of same (specified actions). The Notice specified:
(a)the time for taking the specified actions was by 13 December 2021; and
(b)the time for production to the FWO of reasonable evidence of compliance with the specified actions including proof of payment was by 20 December 2021.
On 18 November 2021, a Ms Martine Merritt (Senior Fair Work Officer – Notice Assistance Team) of the FWO emailed the Second Respondent advising that Fair Work Inspector Cox had asked her to follow up and explained the requirements under the Notice including: to calculate and rectify underpayments by 13 December 2021 and to provide evidence of rectification and payment to the FWO by 20 December 2021, and that failure to meet the requirements of the Notice “will result in the Fair Work Ombudsman giving consideration to commence legal action against the Employer and it's Director/s”.
On 8 December 2021, Ms Merritt sent a follow up email reminding the Respondents of the due dates in the Notice and requesting advice on the Respondents’ progress of calculations.
On 14 December 2021, Ms Merritt emailed the Second Respondent reminding the Second Respondent that payment to the former employee was due on 13 December 2021 and confirmed that no payment had been made.
On 23 December 2021, Ms Merritt wrote to the Second Respondent following a phone discussion they had earlier that day regarding the requirements of the Notice in which the Second Respondent requested an extension. The email indicated that: a Failure to Comply with the Compliance Notice would issue as the Respondents had not provided evidence of compliance. The email requested a response by 10 January 2022 if the First Respondent had a reasonable excuse for not complying and extended the time to comply with the Notice to 10 January 2022. The email advised that if the Notice was not complied with, the FWO may commence litigation.
On 4 January 2022, the Second Respondent emailed Ms Merritt and contended that the former employee was paid the appropriate legal wage as he was “employed to wash dishes” and agreed that the former employee was entitled to 10 hours of personal leave which had been overlooked and not paid as stated in the Notice. The Second Respondent advised that as of the date of this communication, the amount owed had been transferred to the former employee. The Second Respondent concluded that “I will now consider any matters associated with Shahnawaz’s employment dispute to be settled and understand that no further information is required of our company.”
On 10 January 2022, Ms Merritt sent a reminder email to the Second Respondent that the requirements of the Notice were due by close of business that day and advised if the Respondents did not comply with the Notice, the FWO may commence legal action without further notice.
On 11 January 2022 at 2.43pm, Ms Merritt sent an email to the Second Respondent in response to his email of 4 January 2022, which included the following:
1. You have stated that an amount has been paid to the employee in relation to personal leave. Please provide your calculations and evidence of payment as required by paragraph 8 of the Compliance Notice, detailing the hourly rate paid and any taxation amounts paid.
Please note: the Pay Rate Summary you have attached with this email is from 1 March 2018. There have been several rate increases since this date. I have attached a copy of the pay guides for you to view the correct rates of pay payable from the dates specified, to a Level 6, Grade 5 Cook under the Restaurant Industry Award (as in force at the time of the contraventions). Should you require assistance with identifying the correct rates of pay each year/rate increase date, please contact Fair Work Officer Chanel Chen on [email address].
1. The Duties contained in the Employment Contract - Cook, attached to your email and also provided by the employee during the investigation, are not those of a dishwasher or cook. The employee holds a Cert Ill and Cert IV in Commercial Cookery trade qualifications.
2. Please refer to paragraph 5 of the Compliance Notice if you wish to make an application to the court to request a review of the Compliance Notice, on the specific grounds listed.
Based on the above information, the Compliance Notice remains outstanding…
…
If you do not comply in full and provide evidence of such to me by close of business on 18 January 2022, I will be referring this matter to our legal department and will not be available to assist you after 18 January 2022.
(sic.)
On 11 January 2022, at 2.50pm Ms Merritt sent a subsequent email to the Second Respondent advising that he could contact her up to 18 January 2021 for assistance with the Notice and confirmed that “Fair Work Inspector Christine Cox has considered the information you emailed and I confirm that the investigation did consider the information you submitted and the outcome has not changed.”
On 11 January 2022 at 5.36pm, the Second Respondent sent an email to Ms Merritt providing proof of payment for the former employee’s personal leave entitlement and stated:
The employee during his 3 years of employment with the company showed no interest or skills that would indicate the employee was suitable for any other position in the company. Furthermore, the employee has never provided any evidence of any kind to the employer regarding trade qualifications. The employee showed content with his employment and position which is why he stayed with the company for nearly 3 years before choosing to leave the company to settle personal matters overseas. Unsure of when or if he was returning to the company to be able to recommence employment with the company. This is expressed in his resignation letter.
(sic.)
On 11 January 2022 at 6.02pm, Ms Merritt sent the Second Respondent an email confirming that the fair work inspector had considered the evidence including the employment contract and advised that the former employee was correctly classified as a Level 6, Cook Grade 5 and confirmed the former employee had received a payment on 4 January 2022. In that email, Ms Merritt advised the Respondents of 2 options in the following terms:
1.If you believe the Compliance Notice is incorrect and wish to have it reviewed, the process is outlined at Clause 5 of the attached Compliance Notice; this must be undertaken via a court process.
2.That calculations are completed and underpayment rectified by the deadline of 18 January 2021.
On 11 January 2022 at 6.51pm, the Second Respondent replied to Ms Merritt in which he stated that the First Respondent company “doesn’t share the same view” and as far as he is aware the Respondents have complied with the Notice. In cross-examination, the Second Respondent was taken to this communication and initially maintained that he genuinely believed he had complied. Then, when taken to each heading of the Notice, the Second Respondent accepted that the Respondents had not met the requirements contained under headings “calculate and rectify underpayments”, “superannuation” or “reasonable evidence of steps taken to comply with this compliance notice”.
On 12 January 2022, Ms Merritt sent an email in response to the Second Respondent as follows:
Thank you for letting me know your position regarding the Compliance Notice. I will advise the Fair Work Inspector that you will not be complying with the Compliance Notice. Please note that if you do not comply with the Compliance Notice, the Fair Work Ombudsman may, without further notice, commence legal action against you and/or individuals involved in your failure to comply with this Compliance Notice to recover any outstanding monies which this Compliance Notice requires you to pay and will also seek civil penalties.
The Respondents did not take the specified actions by 13 December 2021 and did not provide evidence of compliance to the FWO by 20 December 2021 or 10 January 2022 (as extended by the FWO on 23 December 2021).
On 24 January 2022, the Second Respondent was again appointed as a director of the First Respondent company.
On 19 September 2022, the parties attended a Court-ordered mediation. The matter did not resolve. Subsequently, the First Respondent provided the FWO with the calculations required to be made by the Notice and it was agreed that the former employee would be paid a further $27,523.97 (which the FWO referred to as his outstanding entitlements but the Respondents maintained were never entitlements at all). The First Respondent had made a payment of $6,000 gross on 4 October 2022 and a further payment of $630 being for superannuation on 9 November 2022. The First Respondent agreed to pay the difference by 19 March 2023.
There was evidence before the Court that on 21 September 2022, the Second Respondent sent the former employee a text message to “discuss an offer you might be interested in.” The former employee and Second Respondent attempted to arrange a call until 3 October 2022 when the Second Respondent wrote:
I need to make a decision by the end of the day.
If you and I can’t come to some arrangement I may not be able to afford to pay you anything and be forced to take the company into bankruptcy. I’ll lose less filing for bankruptcy then having to pay you.
Let me know what you want to do today.
In cross-examination, the Second Respondent accepted that he sent the text messages and had discussions with the former employee where he sought to agree that he pay $20,000 if the former employee would repay $10,000. The Second Respondent told the Court that he had attempted to enter this arrangement to try to mitigate the First Respondent’s loss and because he did not believe there was an underpayment and because he had not appreciated it was the FWO that had commenced these proceedings (not the former employee). In cross-examination, the Second Respondent did not accept that this was a deliberate attempt to avoid his legal obligations but could not otherwise explain why repayment of $10,000 would have been necessary other than to tell the FWO he had paid the agreed amount in full when, in truth, he had not.
On or around 15 March 2023, the FWO received confirmation that the First Respondent had paid the difference to the former employee who had by then received a total of $34,153.97. At the hearing, the Second Respondent told the Court that it was easier to pay the former employee “out of his own pocket” because the First Respondent company was otherwise going to have to pursue bankruptcy.
At the time of the hearing on 15 August 2023, the First Respondent remained registered, the Second Respondent was director of the First Respondent (one of two, the other being his father who he said he thought was formerly a chartered accountant) and also director of another registered company. The Second Respondent continued to operate a business, Premier Catering Supplies. Premier Catering Supplies was in the business of selling catering equipment to the catering industry and employed two persons including the Second Respondent. The First Respondent and Second Respondent had no prior contraventions of the Act.
Disputed facts
The following matters were disputed on the evidence before the Court, the relevance of which is considered below.
The underlying contraventions
As will appear, the question of the contraventions underlying the Notice took on some importance in the case.
It was an agreed fact that the belief that Fair Work Inspector Cox formed about the underlying contraventions (detailed at paragraph 16 above, specifically: that the First Respondent had contravened: s.99 of the NES; cl.20.1 of the 2010 Award; and cl.18.1 of the 2020 Award) was a reasonable belief for the purposes of s.716(1) of the Act.
Notwithstanding their agreement as to that reasonable belief the Respondents maintained at the hearing before the Court that there was, in fact, no contravention of the underlying provisions of the NES and the Awards. The Second Respondent confirmed the deliberate decision in defending these proceedings was not to challenge the inspector’s belief as to the contraventions articulated in the Notice itself because that would be a costly exercise and his costs would not be refunded by the FWO.
It was also an agreed fact that the Respondents did not comply with the Notice because they did not take the specified actions or produce evidence of such compliance with the Notice by the required dates. The Second Respondent confirmed this in evidence before the Court. At the same time, he continued to assert that he had complied with the Notice. That same assertion was made in his 11 January 2022 email to the FWO, Although, when asked at the hearing, the fact of compliance was ultimately understood to be conceded when taken to the headings in the Notice (set out above) it was made clear that the Second Respondent believed that the Respondents had complied with the NES and the Award in relation to the former employee’s entitlements and the Notice was wrong to the extent of those alleged contraventions.
The restaurant industry
Fair Work Inspector Cox annexed to her evidence a report titled “Fair Work Ombudsman - Industry profile and FWO interactions – Cafes and Restaurants” which contained data for the period July 2017 to December 2022 prepared by its Strategic Research, Analysis and Reporting Team. Among other summary data, the report concluded:
(a)The “total disputes”, based on 2022-23 business counts and disputes, ranked by industry, were highest in the cafes and restaurants industry;
(b)Of the disputes in the cafes and restaurants industry, 37% related to visa holders;
(c)Of compliance notices issued by the FWO across all industries, the cafes and restaurants industry represented 17.5% in 2020-21, 15.7% in 2021-22 and 18.9% in 2022-23; and
(d)The most common contravention in the cafes and restaurants industry was underpayment of hourly rate, at 14%.
The Second Respondent gave evidence at the hearing, based on his experience and ongoing interactions with restaurant operators, to the effect that staff shortages mean the restaurant industry is presently paying high wages to attract and retain staff.
Materials relied upon
The FWO relied on the following materials:
(a)Statement of claim filed on 9 May 2022;
(b)Statement of agreed facts filed on 15 November 2022 and as amended at the hearing on 15 August 2023;
(c)Affidavit of Shahnawaz Faridi filed on 17 October 2022; and
(d)Affidavit of Fair Work Inspector Ms Christine Cox filed on 19 June 2023.
The Respondents relied on the affidavit of the Second Respondent filed on 13 June 2023.
Both parties filed written outlines of submissions.
THE CONTRAVENTIONS
Sections 716(5) and 550(1) of the Act are civil remedy provisions.
A fair work inspector may apply to this Court for orders in relation to contraventions of ss.716(5) and 550(1): s.539(2). The Court may make any order it considers appropriate where satisfied that a person has contravened a civil remedy provision: s.545(2). The Court may also make a pecuniary penalty order for such contravention: s.546.
I am satisfied that the statement of claim filed in this matter and upon which the FWO relies complies with the rules of pleading and properly pleads a cause of action that supports the grant of relief. In particular, I am satisfied that the facts alleged in the statement of claim and the admissions of the Respondents in the statement of agreed facts establish that the First Respondent contravened s.716(5) by failing to comply with the Notice issued by Fair Work Inspector Cox on 11 November 2021; and the Second Respondent was involved in the First Respondent’s contravention of s.716(5) of the Act by failing to comply with the Notice, pursuant to s.550(1) and within the meaning of s.550(2) of the Act.
The Court has a wide discretion to make declarations. Having regard to the admissions of the Respondents and in the particular circumstances of this case, I am satisfied that this is an appropriate case for declaratory relief, if for no other reason than to record the Court’s disapproval of the contravening conduct.
APPROACH TO DETERMINATION OF PENALTIES
The Court’s power to impose pecuniary penalties in respect of the established contravention resides in s.546(1) of the Act.
Section 546(1) permits the Court to impose a pecuniary penalty “that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision”. For the above reasons, that state of satisfaction exists.
It falls to determine what level of penalty (if any) is appropriate as against the First Respondent and the Second Respondent in light of their respectively established contraventions. The present case involves a single contravention by the First Respondent being a corporation, the maximum penalty for which is $33,300 (s.546(2)(b) and s.539(2)) and a single contravention by the Second Respondent being an individual, the maximum penalty for which is $6,660 (s.546(2)(a) and s.539(2)).
Factors relevant to the Court’s discretion
The purpose of a civil penalty under the regime provided by the Act is primarily, if not wholly, protective in the promotion of the public interest in compliance with the provisions of the Act and in (general and specific) deterrence of further contraventions.[1] An “appropriate” penalty being one that “strikes a reasonable balance between oppressive severity and the need for deterrence in a particular case”.[2]
[1] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13, [15]-[16] (Pattinson) citing the plurality in Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 (the Agreed Penalties Case) and French J in Trade Practices Commission v CSR Ltd [1990] FCA 762.
[2] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13, [41].
The task of assessing what amount to impose involves the selection of a figure taking into account all factors relevant to the particular case.[3] The oft cited decision of French J in Trade Practices Commission v CSR Ltd[4] listed those factors relevant to an overall assessment of penalty, restated by the Full Court in CFMMEU v ABCC:
..the nature, character and seriousness of the conduct; the loss and damage caused; the circumstances in which the conduct took place; the size of the contravener and its degree of power; the deliberateness of the conduct and the time over which it occurred; the degree of involvement of senior officials or management; the culture of the organisation as to compliance or contravention; and, any co-operation with the regulator and contrition.[5]
[3] Wong v The Queen [2001] HCA 64; (2001) 207 CLR 582, 611, [75] (Gaudron, Gummow and Hayne JJ); Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357, 373-375, [37] (Gleeson CJ, Gummow, Hayne and Callinan JJ); Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53; (2018) 260 FCR 68, 84, [55] (Allsop CJ, Davies and Wigney JJ); Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25, 36 [44] (Jagot, Yates and Bromwicgh JJ) as cited by Snaden J at [26] in Australian Building and Construction Commissioner v Pattinson [2019] FCA 1654.
[4] [1990] FCA 762; [1991] ATPR 41-076 at [42].
[5] [2018] FCAFC 97 at [20].
This is not an exhaustive list. Further, each case warrants an “idiosyncratic” approach and a careful analysis of all relevant circumstances - as was stated in Australian Ophthalmic Supplies:
Penalties are not a matter of precedent. The choice of penalty must be dictated by the individual circumstances of a case, not by a line by line comparison with another case.[6]
[6] Australian Opthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8 at [12] (Graham J).
I consider the present matter in light of those well-established principles.
Nature and deliberateness
The relevant conduct in the present case is the First Respondent’s failure to comply with the Notice and the Second Respondent’s involvement in that non-compliance with the Notice. The Notice was issued following investigation and on the basis of Fair Work Inspector Cox’s reasonable belief that the First Respondent had contravened the provisions of the NES and the relevant Award in respect of entitlements owed to the former employee, in particular:
(a)The full-time minimum wage for ordinary hours worked over the period 30 March 2018 to 2 June 2020 (under the 2010 Award) and 3 June 2020 to 1 June 2021 (under the 2020 Award); and
(b)For accrued personal leave for a period of personal leave taken.
The Notice required the First Respondent to take certain remedial actions by 13 December 2021 including, for the specified periods, to: identify the number of ordinary hours worked and personal leave hours taken; identify the amount paid in respect of ordinary hours; calculate the amount that should have been paid in respect of ordinary hours and personal leave; make a payment of the difference, immediately; and make a record of these matters. Evidence of compliance was required by 20 December 2021 and extended to 10 January 2022. This litigation was not commenced until 9 May 2022.
The Notice was given to the Second Respondent on 11 November 2021 by email. The Second Respondent was then responsible for the First Respondent’s compliance with such matters and was aware of the Notice because he acknowledged and responded to various FWO communications about the Notice.
During the period from 18 November 2021 and before these proceedings commenced, numerous attempts were made by the FWO to communicate with the Second Respondent about the need for compliance with the Notice and the consequences of non-compliance. If the Second Respondent’s evidence were to be taken at its highest, the Second Respondent believed that he had complied with the NES and the Award, and this is why he told the FWO on 11 January 2022 that he had complied with the Notice. But that evidence does not sit well with the plain language of the Notice, the various communications from the FWO and opportunities to seek advice or assistance. On all of the evidence, I do not accept that the Second Respondent was ignorant of or mistaken about what was required of the First Respondent and, even if I were so persuaded, would not consider this a reasonable excuse for the failure to comply with the Notice by the required dates. The Second Respondent has not explained why, despite his awareness of the Notice and receipt of reminders from the FWO about what was required (including on 11 January 2022), he did not at least take those steps in the Notice that related to preparation of calculations and justification of amounts already paid to the former employee by 13 December 2021 and produce that evidence by 20 December 2021. Rather, the uncontentious evidence is that the Respondents did not take any of the steps outlined in the Notice by the required dates. The evidence is that compliance with the Notice was forthcoming, completely, by the later date of 15 March 2023.
In light of the above, the Second Respondent was aware of the Notice and the consequences of failure to comply. The decision of the Second Respondent not to comply or ensure the First Respondent’s compliance with the Notice by the required dates was deliberate. The circumstances which gave rise to the Notice should also be taken into account in determining penalty in this case.
It is also relevant that this is not a case where there is a history of prior contraventions of the Act, by either Respondent.
Loss and damage
By the Respondents’ failure to comply with the requirements of the Notice to prepare calculations and provide details of payments made, the former employee suffered delay in understanding the entitlements to which he was owed.
Further, whilst they maintained no admissions as to contraventions of the NES and Award and there is no finding as to those matters, the First Respondent ultimately paid $34,153.97 to the former employee in resolution of the identified underpayment issues in the Notice. It follows that the former employee was delayed receipt of those payments which, as the FWO highlighted, was equivalent to almost one years’ salary that he had earned during his employment with the First Respondent. There is evidence before the Court that the former employee experienced personal hardship on account of his low earnings for work performed with the First Respondent.
Also relevant is the consideration of public loss occasioned by the regulator bringing these enforcement proceedings in the absence of an early resolution of the matter.
Corrective action, cooperation with the FWO and contrition
The Respondents engaged with the FWO and attended to compliance with the Notice before the final hearing date.
Further, the Respondents spared some cost and complexity by working with the FWO to submit an agreed statement of facts.
There was no statement of regret forthcoming from the Second Respondent on behalf of himself or the First Respondent (whether in evidence or oral submissions). To the contrary, the Respondents maintained no contravention or wrongdoing (despite not having complied with the Notice by the specified dates) and were somewhat indignant at the suggestion that a penalty may be imposed submitting this may deter them from conducting a business that employs persons in the future.
The Second Respondent’s attempts to resolve the matter with the former employee directly reflected what might be seen as a commercially driven approach which is consistent with his denial of any contravention of the NES and Award. Unfortunately, those attempts also reflected a concerning naivety as to the operation of workplace laws, indicated an intent to subvert the FWO’s performance of its functions and underscored the lack of contrition.
Size of the business, management and financial circumstances
At the time of the hearing, the First Respondent no longer operated Spinnakers Brasserie but remained registered.
The Second Respondent is one of two directors of the First Respondent and was by his own admission in a position to ensure the First Respondent’s compliance with the Notice and involved in the First Respondent’s contravention. This would only be strengthened if the second director, the Second Respondent’s father, were a chartered accountant which appeared to be the case according to the somewhat vague oral evidence of the Second Respondent on that matter.
The Second Respondent told the Court they had initially engaged a lawyer, but could not afford to continue this and had no legal representation at the hearing. There was some evidence of the circumstances of the Spinnakers Brasserie business closure, which occurred during COVID-19, and that the Second Respondent had paid the former employee “out of his own pocket” because the First Respondent company was otherwise going to have pursue bankruptcy, but there is no specific evidence of the financial circumstances of the Respondents before the Court.
Compliance with minimum standards
A further and important consideration in this case is the need for compliance with the statutory framework. Compliance notices are an important mechanism which enable the FWO to deal with non-compliance with minimum entitlements in the Act as an alternative to litigation. It also provides employers with a means of early resolution and rectification without penalty.
The failure to comply with a statutory notice issued by the FWO is serious and such conduct ultimately undermines the Act’s enforcement framework and the safety net of entitlements it is designed to protect.
Deterrence
The principles and importance of general and specific deterrence are well-established.
The FWO’s data in evidence before the Court demonstrated a relatively high instance of underpayment disputes in the café and restaurants industry in the period between July 2017 and December 2022, including at the time of the contraventions in this case. Further, that a significant number of underpayment disputes in the industry relate to vulnerable migrant workers.
The Second Respondent’s oral evidence about high pay across the industry at the present time was at best anecdotal. I accept that the FWO’s statistics as presented may well reflect the FWO’s priorities. Nonetheless, I accept it to support a finding that there is a need for general deterrence in this matter to emphasise the importance of an effective compliance framework, the maintenance of effective minimum terms and conditions of employment and adherence to the provisions of industrial instruments.
This is also a case where there is a need for specific deterrence. In so finding, I have had regard to the eventual rectification of the non-compliance with the Notice and that this is the first contravention of its kind by the Respondents. However the lack of any expression of regret and the Second Respondent’s conduct in the proceedings is concerning, particularly in circumstances where the Second Respondent continues to operate a business of which he is a director, and which employs one other person, and the First Respondent remains registered.
THE APPROPRIATE PENALTY
When all of the above factors are considered, I am satisfied that it is appropriate to impose a pecuniary penalty on the First Respondent for its contravention of s.716(5) and on the Second Respondent for his involvement in that contravention pursuant to s.550(1) of the Act.
The FWO sought penalties in the amount of $15,984 for the First Respondent (including a 20% discount) and $5,661 for the Second Respondent.
I consider it is essential that the penalty be imposed at such a level as not to simply constitute a cost of doing business. In the particular circumstances of this case, penalties in the range of 60% of the maximum for the First Respondent and 85% of the maximum for the Second Respondent are excessive.
Weighing the various competing factors, I consider it appropriate to fix the penalties at:
(a)30% of the maximum for the First Respondent, less a 20% reduction for the First Respondent on account of the corrective action and cooperation demonstrated in accordance with my findings above ($7,992); and
(b)30% of the maximum for the Second Respondent ($1,998), and in light of the findings about the lack of contrition and regret and the Second Respondent’s conduct in the proceedings, a discount for the Second Respondent is not warranted.
In my view, this is a proportionate response to the respective contraventions and strikes a reasonable balance between oppressive severity and the need for deterrence in this particular case.
For the above reasons, I will make declarations and orders accordingly.
I certify that the preceding eighty-six (86) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Mansini. Associate:
Dated: 24 August 2023
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