Fair Work Ombudsman v Ultra Tune Australia Pty Ltd
[2012] FMCA 560
•3 August 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v ULTRA TUNE AUSTRALIA PTY LTD | [2012] FMCA 560 |
| INDUSTRIAL LAW – Civil penalty provisions – admission of contraventions – agreed statement of facts – principles and considerations relevant to penalty – prior ability to apply for reduction in severance payment – determination of whether two or more courses of conduct – relevance of size of business and capacity to pay. WORDS AND PHRASES – “an applicable provision” – “term”. |
| Evidence Act 1995 (Cth), s.191 Fair Work Act 2009 (Cth), ss.539, 687, 701, 718(1), 719 Fair Work Regulations 2009 (Cth) Industrial Relations Act 1988 (Cth), s.178(2) Migration Regulations 1994 (Cth), reg.2.79 Vehicle Industry – Repair, Services and Retail Award 2002 cll.6(d), 24(b)(iii), 43(e)(i) Workplace Relations Act 1996 (Cth), ss.3, 4, 169, 182, 183, 208, 717, 719, 841 Workplace Relations Amendment (Work Choices) Act 2005 (Cth) Workplace Relations Regulations 2006 (Cth), reg.14.3(2) |
| Attorney-General v Tichy (1982) 30 SASR 84 Ponzio v B & P Caelli Constructions Pty Ltd and Ors (2007) 158 FCR 543; [2007] FCAFC 65 Printed & Kindred Industries Union & Ors v Vista Paper Products Pty Ltd & Anor (1994) 127 ALR 673 Wong v The Queen (2001) 207 CLR 584; [2001] HCA 64 Workplace Ombudsman v Golden Maple Pty Ltd (2009) 186 IR 2011; [2009] FMCA 664 |
| O Jones “When is the Federal Magistrates Court bound by the Federal Court?” (2012) 86 ALJ 478 | ||
| Applicant: | FAIR WORK OMBUDSMAN | |
| Respondent: | ULTRA TUNE AUSTRALIA PTY LTD |
| File Number: | PEG 175 of 2011 |
| Judgment of: | Lucev FM |
| Hearing date: | 28 June 2012 |
| Date of Last Submission: | 28 June 2012 |
| Delivered at: | Perth |
| Delivered on: | 3 August 2012 |
REPRESENTATION
| Counsel for the Applicant: | Mr G Spain |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| Counsel for the Respondent: | Mr TR Stephenson |
| Solicitor for the Respondent: | Mr A Chong |
DECLARATIONS AND ORDERS
The Court declares that:
(a)by paying Nectar Colis a flat rate of $15.35 per hour for all hours worked and annual leave taken during his employment, the respondent contravened:
(i)section 182(1) of the Workplace Relations Act 1996 (Cth) (“WR Act”); and
(ii)clause 24(b)(iii) of the Vehicle Industry – Repair, Services and Retail Award 2002 (“Vehicle Industry Award”);
(b)by failing to pay Nectar Colis payment in lieu of notice on termination of employment, the respondent contravened clause 6(d) of the Vehicle Industry Award;
(c)by failing to pay Nectar Colis severance payment on termination of employment, the respondent contravened clause 43 of the Vehicle Industry Award; and
(d)in contravening the provisions referred to in sub-paragraphs (a) to (c) the respondent underpaid Nectar Colis by $9,642.55.
AND THE COURT ORDERS THAT:
The respondent pay a penalty of $8580 to be paid to the Commonwealth Consolidated Revenue Fund by 31 October 2012.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 175 of 2011
| FAIR WORK OMBUDSMAN |
Applicant
And
| ULTRA TUNE AUSTRALIA PTY LTD |
Respondent
REASONS FOR JUDGMENT
Application and liability
The applicant, the Fair Work Ombudsman,[1] seeks orders for the imposition of penalties against the respondent, Ultra Tune Australia Pty Ltd,[2] for contraventions of the Workplace Relations Act 1996 (Cth)[3] and the Vehicle Industry – Repair, Services and Retail Award 2002.[4]
[1] “FW Ombudsman”.
[2] “Ultra Tune”.
[3] “WR Act”.
[4] “Vehicle Industry Award”. Generally in these Reasons for Judgment “Vehicle Industry Award” is used to refer to both the Vehicle Industry Award and the relevant pay scale under the Vehicle Industry Award as prescribed by the Australian Pay and Classification Scale on and from 27 March 2006.
There is an admission of liability by Ultra Tune in relation to contraventions of the WR Act[5] and Vehicle Industry Award, and an agreed statement of facts and admissions.[6] The remaining issue in these proceedings is for the Court to assess the quantum of penalty payable for the contraventions.
[5] Pre-WR Act contraventions were not pressed.
[6] “Agreed Statement”.
Contraventions
The admitted contraventions are set out at paragraphs 31 to 34 of the Agreed Statement, which appears below.[7]
[7] See para.4 below.
Agreed Statement
The terms of the Agreed Statement are as follows:
AGREED FACTS
1The parties agree that the facts in this document are agreed facts for the purposes of section 191 of the Evidence Act 1995 (Cth).
THE APPLICANT
2The Applicant is:
(a)a statutory appointee of the Commonwealth under section 687 of the Fair Work Act 2009 (Cth) (FW Act);
(b)a Fair Work Inspector under section 701 of the FW Act; and
(c)a person with standing and authority to bring these proceedings under:
(i) subsection 718(1) of the Workplace Relations Act 1996 (Cth) (WR Act) as it continues to apply by virtue of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (Transitional Act) after the WR Act repeal day;
(ii) regulation 14.3(2) of the Workplace Relations Regulations 2006 (Cth) (WR Regulations) as they continue to apply by virtue of the Transitional Act after the WR Act repeal day; and
(iii) section 539 of the FW Act.
3At all material times, the Respondent:
(a)was a constitutional corporation within the meaning of section 4 of the WR Act; and
(b)was an employer within the meaning of section 4 (prior to 27 March 2006) and section 6 (on and from 27 March 2006) of the WR Act.
THE EMPLOYEES
Colis
4Nectar Colis (Colis) commenced employment with the Respondent on or about 7 February 2006. At all material times Colis was a ‘primary sponsored person’ holding a Subclass 457 visa and the Respondent was the ‘standard business sponsor’ of Colis and owed the obligations to Colis required by the Migration Regulations 1994 in addition to those obligations referred to below in paragraph 12. The employment of Colis was pursuant to a business of the Respondent to provide labour for its franchisees of which the Warwick Store was one.
5Colis ceased employment with the Respondent on or about 17 October 2007
6Colis was employed by the Respondent as he represented he was a qualified motor mechanic.
7Colis was employed to work at the direction of the Ultra Tune Warwick vehicle service centre (the Warwick Store) but usually worked 44 hours per week.
8The Warwick store carried on business as a franchisee of the Respondent
9For the duration of his employment with the Respondent, Colis’ duties included:
(a)servicing motor vehicles with limited supervision;
(b)repairing motor vehicles with limited supervision; and
(c)cleaning the workshop at the Warwick store.
10At all material times Colis held a trade certificate in general automotive mechanics issued to him in the Phillipines.
11For the duration of his employment, the Respondent paid Colis wages at a flat rate of $15.35 per hour.
APPLICABLE INDUSTRIAL INSTRUMENTS
12At all material times, the Respondent was bound by:
(a)the WR Act;
(b)the WR Regulations; and
(c)the Migration Regulations 1994 (the MR) including in particular reg.2.79.
13At all material times, the Respondent was a named respondent to the Vehicle Industry – Repair, Services and Retail Award 2002 (Vehicle Industry Award).
14At all material times, Colis performed duties consistent with the classification of Tradesperson or Equivalent Level 6 under the Vehicle Industry Award.
15Under section 208 of the WR Act, the rates provisions determining the basic periodic rate of pay for employees under the Vehicle Industry Award were preserved as an Australian Pay and Classification Scale (Vehicle Industry Pay Scale) on and from 27 March 2006.
16During his employment, the Respondent was bound to pay Colis in accordance with:
(a)from the commencement of his employment to 26 March 2006, clause 8 of the Vehicle Industry Award;
(b)from 27 March 2006, the Vehicle Industry Pay Scale; or
(c)the conditions specified in instruments in writing issued by the Minister pursuant to the MR from time to time,
whichever was the most favourable to Colis.
ALLEGED UNDERPAYMENT CONTRAVENTIONS
Failure to pay basic periodic rate of pay
17The basic periodic rate of pay for a Tradesperson or Equivalent Level 6 for weekday work was as follows:
Date
Rate of pay
Source
Prior to 27 March 2006
$15.22/hr
Vehicle Industry Award
27 March 2006 – 30 November 2006
$15.22/hr
Vehicle Industry Pay Scale
Pay period commencing 1 December 2006 – 30 September 2007
$15.94/hr
Vehicle Industry Pay Scale
Pay period commencing 1 October 2007 – 30 September 2008
$16.21/hr
Vehicle Industry Pay Scale
18Under section 182(1) of the WR Act, an employee covered by a pay scale was entitled to be paid a basic periodic rate of pay for each of the employee’s guaranteed hours (determined under section 183 of the WR Act) at least equal to the basic periodic rate of pay under the pay scale.
19From 27 March 2006, the Respondent was obliged to pay Colis for 44 hours work per week at a minimum of the rates specified in paragraph 17.
20Throughout his employment, the Respondent did not pay Colis for 44 hours work per week at a minimum of the rates specified in paragraph 17.
Failure to pay overtime
21Under clause 24(b)(iii) of the Vehicle Industry Award, an employee other than a casual employee required to work outside the employee’s ordinary hours was entitled to be paid:
(a)time and a half for the first three hours; and
(b)double time thereafter.
22Under clause 18 of the Vehicle Industry Award, the ordinary hours of an employee were an average of 38 hours per week.
23During his employment, when Colis worked beyond ordinary hours the Respondent did not pay Colis the overtime rates set out in paragraphs 21 & 22.
Failure to make payment in lieu of notice
24Under clause 6(d) of the Vehicle Industry Award, an employee with between 1 and 3 years of service was entitled to 2 weeks notice of termination of employment or payment in lieu of such notice.
25On or about 17 October 2007 the Respondent did not provide Colis with such notice of termination of employment or payment in lieu.
Failure to pay redundancy payments
26Under clause 43 of the Vehicle Industry Award, an employee was entitled to severance pay as outlined in that clause if his or her employment was terminated by reason of redundancy, that is, where the employer no longer wishes the job the employee has been doing done by anyone.
27On or about 17 October 2007, the Respondent decided that it was no longer intending to operate the business of supplying labour to its franchisees as a standard business sponsor and Colis’ employment was no longer required.
28The Respondent terminated Colis’ employment because of this decision.
29The Respondent did not pay Colis severance pay on termination.
30Following termination, Collis’ was employed forthwith by Buddy and Tora WA Pty Ltd the franchisee of the Warwick Store in the same position he had held prior to the redundancy.
ADMISSIONS
31The Respondent admits that by failing to pay Colis for 44 hours work per week at a minimum of the rates specified in paragraph 17 for periods of Colis’ employment, the Respondent contravened section 182(1) of the WR Act.
32The Respondent admits that by failing to pay Colis overtime rates, the Respondent contravened clause 24(b)(iii) of the Vehicle Industry Award.
33The Respondent admits that by failing to give Colis notice of termination or payment in lieu of same, the Respondent contravened clause 6(d) of the Vehicle Industry Award.
34The Respondent admits that by failing to pay Colis severance pay, the Respondent contravened clause 43 of the Vehicle Industry Award.
35The Respondent admits that as a result of its contraventions of the WR Act and the Vehicle Industry Award in relation to Colis, the Respondent underpaid Colis by $9,642.55
36Prior to 29 June 2011 the Respondent caused to be paid to Colis $11,642.92 representing the amount that the Applicant had then informed the Respondent was the underpaid wages and entitlements of Colis.
Penalty – general principles and considerations
General principles concerning penalty
The federal courts have regard to general principles which have been developed in relation to the imposition of penalties in workplace relations matters, including the following:
a)fundamentally, the penalty must be proportionate to the gravity of the contravening conduct;[8]
[8] Attorney-General v Tichy (1982) 30 SASR 84 at 92 per Wells J; Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2011] FCA 810 at para.25 per Gilmour J (“ABCC”).
b)penalties are imposed for the following purposes:
i)punishment, proportionate to the offence and according to prevailing standards;
ii)personal or specific deterrence, assessing the risk of reoffending, and general deterrence, as a deterrent to others who might be likely to offend; and
iii)rehabilitation;[9]
c)the sentencing task is one of instinctive synthesis in which the court takes account of all relevant factors and arrives at a single result taking due account of all of those relevant factors;[10]
d)proportionality and consistency are a final check on the penalty assessed;[11]
e)courts may identify a range of factors appropriate to the assessment of penalty, but ought to be wary of the use of check lists which “give rise to the risk of transforming the process of instinctive synthesis into the application of a rigid catalogue of matters for attention”;[12] and
f)courts ought also be wary of comparing penalties from other cases when assessing the amount of penalty to be fixed.[13]
[9] Ponzio v B & P Caelli Constructions Pty Ltd and Ors (2007) 158 FCR 543 at 559-560 per Lander J; [2007] FCAFC 65 at para.93 per Lander J (“Caelli Constructions”); ABCC at para.26 per Gilmour J.
[10] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at 567-568 per Gray J and 572 per Graham J; [2008] FCAFC 8 at para.27 per Gray J and para.55 per Graham J (“Australian Ophthalmic Supplies”); Wong v The Queen (2001) 207 CLR 584 at 611-612 per Gaudron, Gummow and Hayne JJ; [2001] HCA 64 at paras.74-76 per Gaudron, Gummow and Hayne JJ; ABCC at para.27 per Gilmour J.
[11] Australian Ophthalmic Supplies FCR at 572 per Graham J; FCAFC at para.54 per Graham J; ABCC at para.28 per Gilmour J.
[12] ABCC at para.30 per Gilmour J; Australian Ophthalmic Supplies FCR at 579-580 per Buchanan J; FCAFC at paras.89-91 per Buchanan J.
[13] NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 295 per Burchett and Kiefel JJ; ABCC at para.31 per Gilmour J.
General considerations relevant to assessment of penalty
Considerations which may be taken into account in assessment of penalty are well established and have been consistently applied by this
Court,[14] but are not fixed or immutable.[15] Broadly, the relevant factors can be listed as follows:
[14] Examples include: Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 (“Mason”); Olsen v Sterling Crown Pty Ltd (2008) 177 IR 337; [2008] FMCA 1392 (“Sterling Crown); Construction, Forestry, Mining and Energy Unionv Austral Bricks (Qld) Pty Ltd (2009) 178 IR 470; [2009] FMCA 143; Workplace Ombudsman vGolden Maple Pty Ltd (2009) 186 IR 211; [2009] FMCA 664 (“Golden Maple”); Fair Work Ombudsman v Industrial Roadpavers (WA) Pty Ltd (2010) 194 IR 436; [2010] FMCA 204 (“Industrial Roadpavers”).
[15] Australian Ophthalmic Supplies FCR at 580 per Buchanan J; FCAFC at para.91 per Buchanan J; Golden Maple IR at 224 per Lucev FM; FMCA at para.11 per Lucev FM.
a)the nature and extent of the conduct which led to the contraventions;
b)the circumstances of the conduct (including deliberate defiance or disregard of Commonwealth workplace relations legislation);
c)the consequences of the contravening conduct;
d)the objects of Commonwealth workplace relations legislation;
e)whether the contraventions are distinct or arise from a single course of conduct;
f)deterrence, both general and specific;
g)relevant record of civil penalty contraventions;
h)the size and financial resources of the contravener;
i)co-operation with regulatory authorities;
j)the contravener’s contrition;
k)the size of the prescribed penalty, and any recent increases to that prescription; and
l)the totality principle.
A number of the factors are relevant to the present matters and are therefore considered below.
Nature and extent of the conduct and circumstances in which the conduct took place (including loss and damage)
FW Ombudsman’s submissions
The FW Ombudsman submits:
a)compliance with the WR Act and the Vehicle Industry Award is important and should not be ignored by employers;
b)the nature and extent of Ultra Tune’s conduct was significant because:
i)at all material times Colis was a “primary sponsored person” holding a subclass 457 visa and Ultra Tune was the “standard business sponsor” of Colis, and owed the obligations to Colis required by the Migration Regulations 1994 (Cth);[16]
[16] “Migration Regulations”.
ii)Colis was a foreign national, unfamiliar with Australia’s labour practices; and
iii)Ultra Tune’s conduct occurred over a period of 18 months, between February 2006 and October 2007;
c)Colis was paid less than the guaranteed basic periodic rate of pay under the Vehicle Industry Award, and in addition, Ultra Tune failed to:
i)pay overtime outside of Colis’ ordinary hours;
ii)make payment in lieu of notice on termination; and
iii)make severance payments on termination;
d)the amount of the underpayment in total is $9,642.55, and the FW Ombudsman says that such underpayments amounted to a significant loss to Colis.
Ultra Tune’s submissions
Ultra Tune submits that:
a)at the core of all the matters is the obligation to pay the correct rate or amount. Paragraphs18-20 of the Agreed Statement should not be read as an admission that Ultra Tune did not pay Mr Colis for the hours worked by him at all. Rather, the admission is on the basis that Ultra Tune paid a flat rate for all the hours worked, and that this was less than what was required to be paid (a matter which was not disputed);
b)without minimising the loss to Mr Colis, but seeking to distinguish this matter from Kelly v Fitzpatrick,[17] where the loss amounted to a third of the wages the employee was otherwise to receive,[18] in the present case the loss is about 5-6% for the 44 hours per week. As a percentage, the underpayment is substantially less than in Kelly, and therefore deserving of a lesser scale of penalty;
c)even before the proper amount was calculated, when Ultra Tune had been informed by the FW Ombudsman that the amount would be more than $10,000 it made a payment to Mr Colis in that amount. Further, another payment of $1642.92 was made prior to these proceedings issuing on 8 April 2011, and within two days after the amount was advised by the FW Ombudsman.[19] The FW Ombudsman has now effectively conceded that the actual amount of underpayment was only $9,642.55, and therefore there has been a $2,000 overpayment which Ultra Tune is not likely to recover because Mr Colis has left Australia. Therefore, the FW Ombudsman’s assertion that the underpayments amounted to a significant loss to Mr Colis appears unjustified in all the circumstances;
d)Counsel submits that he was instructed, whilst preparing submissions, that the Ultra Tune’s Warwick franchisee has no assets, and is not able to repay the amounts which Ultra Tune paid in 2010 and 2011. Therefore, in a commercial sense, Ultra Tune has sustained significant financial loss through undertaking responsibility for Mr Colis from the franchisee;
e)due to the arrangements between the franchisee and Ultra Tune Mr Colis suffered no loss of continuous employment, which is the harm that the payment of a period of notice is usually intended to mitigate. Further, to the extent that Mr Colis was not paid out his other accumulated leave entitlements he actually received these pursuant to the agreement with the franchisee, in that, he received the full holiday leave he had accrued during his employment with Ultra Tune prior to cessation of his employment with the franchisee, and, as far as can be calculated received the other amounts when his employment with the franchisee was terminated early in 2008;[20] and
f)clause 43(e)(i) of the Vehicle Industry Award (as it was at the material time) allowed the employer to apply to the then Australian Industrial Relations Commission[21] to have the general severance pay prescription varied if an employer obtained acceptable alternative employment for an employee. In this case, through agreement between Ultra Tune and Ultra Tune’s franchisee, Ultra Tune found suitable alternative employment for Mr Colis in the same position and at the same workplace as he was employed with Ultra Tune.[22] An application to the AIRC to vary the general severance pay prescription would therefore appear to have had substantial merit, but, because the matters the subject of the FW Ombudsman’s investigation were not raised until several years after these events, such application is no longer realistic or viable. Therefore, in deciding the penalty for this particular breach, Ultra Tune submits that this breach is a technical breach, and should only attract a nominal penalty.
[17] (2007) 166 IR 14; [2007] FCA 1080 (“Kelly”).
[18] Kelly IR at 19 per Tracey J; FCA at para.18 per Tracey J.
[19] Agreed Statement, para.36; Affidavit of Wee-Tai Chong, sworn 20 June 2012, para.17 (“Mr Chong’s Affidavit”). There is a $6 discrepancy between the amount referred to in the Agreed Statement and the amount referred to in Mr Chong’s Affidavit. The difference is of no moment to the ultimate disposition of this case.
[20] Mr Chong’s Affidavit, paras.12 and 14 and Annexure 3.
[21] “AIRC”.
[22] Mr Chong’s Affidavit, paras.12 and 14.
Consideration
By reason of the Agreed Statement and the effect of s.191 of the Evidence Act 1995 (Cth) the Court must accept, and would in any event have accepted, that the contravening conduct was a failure to pay Colis:
a)the basic periodic rate of pay;
b)overtime for time worked outside of ordinary hours;
c)in lieu of notice upon termination; and
d)severance payments on termination.
The objects of the WR Act include the maintenance of a minimum level of entitlements. Contraventions undermine the statutory purposes of the WR Act.[23] Part of the damage in a case like this is to the utility and effectiveness of the relevant statutory purpose.[24] The conduct in question occurred over a period of 18 months in relation to the failure to pay the basic periodic rate of pay and failure to pay overtime. The making of payments prescribed by workplace relations legislation establishing minimum conditions is an essential requirement of running any business which engages employees. It is even more significant when the conduct is engaged in by an employer operating a national franchise network of vehicle service centres, and which provided Mr Colis’ labour to the franchisee that ran the Warwick franchise.
[23] WR Act, ss.3 and 169.
[24] Secretary, Department of Health and Ageing v Pagasa Australia Pty Ltd [2008] FCA 1545 at para.56 per Flick J; Fair Work Ombudsman v Industrial Roadpavers (WA) Pty Ltd (2010) 194 IR 436 at 446 per Lucev FM; [2010] FMCA 204 at para.28 per Lucev FM.
The loss in cases involving contravention of basic periodic rates of pay, and minimum or industrial instrument entitlements payable:
a)periodically; or
b)upon the occurrence of a particular event, like termination and redundancy,
must be assessed as to their effect at the time of the non-payment to the employee. That is because workplace relations legislation providing for the payment of entitlements is intended to be beneficial in its effect, and has the purpose of endeavouring to ensure that an employee is paid entitlements at specified times. The legislative intention is undermined by a failure by an employer to make the required payments at the specified times. Whilst some credit must be given to an employer who, as Ultra Tune has done here, remedies the underpayments and non-payments promptly upon the FW Ombudsman’s advising it of an alleged contravention, and indeed has overpaid Mr Cotis by approximately $2000, it will often be the case that the loss, and consequent damage suffered, has already had its primary effect. This might, for example, be the case for an underpaid low income earner who cannot pay the rent or the power bill, or afford to pay for school excursions or new shoes for their children, as a result of underpayment or non-payment. In such cases a late remedial payment might not remedy damage already caused by the loss of income suffered by a failure to pay entitlements on time.
In this case, however, there is no evidence before the Court as to the effect of the contraventions on Mr Colis. The Court simply does not know what, if any, particular hardship was entailed in Ultra Tune’s failure to pay Mr Colis correctly whilst he was employed, and to pay him correctly upon termination of his employment. The Court can however infer from the fact that:
a)Mr Colis was an employee earning as a basic periodic rate of pay:
i)$669.68 a week (or approximately $34,935 a year) from 27 March 2006 to 30 September 2007; and
ii)$713.24 a week (or approximately $37,207 a year) from 1 October 2007 to 30 September 2008; and
b)the total of the underpayments was an amount of $9,642.55, part of which was spread over a period of 18 months,
that this was an underpayment which might have had some effect on Mr Colis’ financial and personal circumstances.
There is no evidence that Mr Colis was unfamiliar with Australia’s labour practices. There is no statement to that effect in the Agreed Statement, and the FW Ombudsman filed no affidavit evidence and led no oral evidence. The Court cannot simply assume that because an employee is a foreign national, that the employee is unfamiliar with Australia’s labour practices, or more vulnerable to underpayment or exploitation than any other employee.[25]
[25] Hanssen Pty Ltd v Jones (2009) 179 IR 57 at 66-67 per Siopis J; [2009] FCA 192 at paras.55-56 and 60 per Siopis J.
In this case, the contravening conduct was also conduct which contravened Ultra Tune’s obligations under the Migration Regulations.
Regulation 2.79 of the Migration Regulations need not be set out. It is long and convoluted, and it is not difficult to understand why even a firm of lawyers and migration agents might incorrectly advise their client as to its meaning. The Court accepts that incorrect advice was given to Ultra Tune in this case, in that Ultra Tune was not advised that it was obliged to pay minimum legislative or industrial instrument (in this case, the Vehicle Industry Award) rates exceeding those specified under the Migration Regulations by the relevant Minister.[26]
[26] Mr Chong’s Affidavit, paras.7-11.
Insufficient information is before the Court by way of the Agreed Statement and Mr Chong’s Affidavit to determine the precise extent of the application of the convoluted reg.2.79 of the Migration Regulations. It suffices to observe that it is accepted that an employee is to be paid the terms and conditions which are most favourable to him applying under Australian law, with certain exceptions which do not appear relevant in the circumstances. The mere fact that Ultra Tune was therefore obliged to comply with the WR Act and the Vehicle Industry Award by reason of reg.2.79 of the Migration Regulations adds little, if anything, to the nature and extent of the conduct, or the circumstances in which the conduct took place, as the obligations pursuant to the WR Act and the Vehicle Industry Award on the one hand, and under the provisions of reg.2.79 of the Migration Regulations on the other hand, were the same.
In relation to the ability of Ultra Tune to have applied to the then AIRC to vary the general severance pay prescription on the basis that it had obtained Mr Colis acceptable alternative employment, despite suggesting that the application had substantial merit, Ultra Tune cited no authority which would assist in determining whether that was so or not. It was not, however, disputed that the Vehicle Industry Award contained a provision which provided for an employer in a particular redundancy case to make application to the then AIRC to have the general severance pay prescription varied if the employer obtained acceptable alternative employment for the employee.
In Clothing Trades Award 1982(1)[27] a redundancy provision in an award to the same effect as that under the Vehicle Industry Award was under consideration by a Full Bench of the then AIRC.
[27] (1990) 140 IR 123 (“Clothing Trades Award”).
The Full Bench of the AIRC held that the question of whether particular employment for an employee is acceptable must be determined according to objective standards, and in so doing followed an earlier judgment of a Full Bench of the then Australian Conciliation and Arbitration Commission[28] in Clothing & Allied Trades Union of Australia v Hot Tuna Pty Ltd.[29] In Clothing Trades Award the Full Bench of the AIRC went on to observe as follows:
… the use of the qualification “acceptable” is a clear indication that it is not any employment which complies but that which meets the relevant standard. In our opinion there are obvious elements of such a standard including the work being of like nature; the location being not unreasonably distant; the pay arrangements complying with award requirements. There will probably be others.[30]
The exemption provision imports the notion that an effort of a sufficient kind by an outgoing employer may cause his obligation for redundancy pay to be reduced; …[31].
[28] “ACAC”.
[29] (1988) 27 IR 226 (“Hot Tuna”).
[30] Clothing Trades Award at 128 per Peterson J, Marsh DP, Oldmeadow C.
[31] Clothing Trades Award at 129 per Peterson J, Marsh DP, Oldmeadow C.
In Hot Tuna a Full Bench of the ACAC held that the onus was on an employer seeking exemption from redundancy provisions to establish the acceptability of alternative employment, and that the test is an objective one, involving a consideration of such matters as pay levels, hours of work, seniority, fringe benefits, workload and speed, job security and other matters.[32] In Hot Tuna the Full Bench of the ACAC then went on to observe as follows:
[32] Hot Tuna at 230-231 per Munro and Peterson JJ, Leary C.
It was argued that the failure of the employer to adduce evidence of such matters caused the company to fail to make out a case for an exemption. We have no doubt that there is an onus on the employer invoking cl 51(c) and the matters of the kind referred to by the union may be relevant in assessing the position in a particular case. We do not believe it to be necessary to make that examination in every case. Where an employee has accepted alternative employment in circumstances as those here, then in the absence of positive evidence going to the unacceptability of that employment, including unacceptable features of it, then the Commission is entitled to hold the employment as an acceptable alternative and relieve the employer of the obligation under cl 51(c) of the award. In this case, the evidence before the commissioner was that the five employees in question were given notice of the transfer with access to management to raise any difficulties involved, and that there was no resort to this access. Further, on 20 August 1987, almost four months after the transfer, three employees were offered a return to the company but declined. We would regard it as reasonably open on this evidence for the commissioner to conclude that the work was acceptable alternative employment within the meaning of the clause.
…
… in determining whether or not acceptable alternative employment has been obtained, what was required of the commissioner was a process of arbitral evaluation of the facts proved in evidence or otherwise established.[33]
[33] Hot Tuna at 231 per Munro and Peterson JJ, Leary C.
Ultra Tune did not make an application in October 2007 to vary the general severance pay prescription in the Vehicle Industry Award with respect to Mr Colis. Ultra Tune did not do so because it did not know that the Vehicle Industry Award applied to Mr Colis’ employment. In this respect, Ultra Tune are in no different a position to any other employer ignorant of relevant award provisions, who contravene those provisions. Ignorance is not an excuse for contravening award provisions. Ultra Tune did, however, rely, in relation to Mr Colis’ employment on a subclass 457 visa, on advice from a firm of lawyers and migration agents with respect to the correct payment for Mr Colis. The Court has already accepted that Ultra Tune was not given correct advice by its lawyers and migration agents.[34] This provides at least some explanation for its ignorance of the Vehicle Industry Award severance payment provision. If Ultra Tune had been aware of the Vehicle Industry Award provision entitling it to apply to reduce the general severance pay prescription an application to the then AIRC could have been made to vary that prescription for Mr Colis. Whether such an application would have been granted would have been a matter for an arbitral evaluation by the AIRC given all of the relevant facts as at the relevant time, that is, 17 October 2007. There is, however, on the authorities cited above, a very real probability that had such an application been made then Mr Colis’ entitlement to severance pay might have been reduced. It remains, however, the case that the Vehicle Industry Award provision was not the subject of an application by Ultra Tune, and that it was contravened. The surrounding circumstances provide some explanation for the contravention, but not such as to warrant no penalty being imposed in respect of this particular contravention. The surrounding circumstances do however provide a reason to impose a lesser penalty with respect to the severance pay contravention.
[34] See para.16 above.
Similar previous conduct
There is no dispute, and the Court accepts, that Ultra Tune is a first time contravener of workplace relations legislation, and in the absence of countervailing factors (such as a lack of contrition or co-operation), is entitled to some discount on penalty.
Whether the contraventions arose out of one course of conduct
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)the contraventions admitted by Ultra Tune in respect of Mr Colis constitute a breach of four distinct applicable provisions, being:
i)section 182(1) of the WR Act;
ii)clause 24(b)(iii) of the Vehicle Industry Award;
iii)clause 6(d) of the Vehicle Industry Award; and
iv)clause 43 of the Vehicle Industry Award,
and, therefore, four separate penalties ought to be imposed;
b)section 719(2) of the WR Act provides that where two or more contraventions of an applicable provision are committed by the same person, and the contraventions arose out of a “course of conduct” by the person, the contraventions shall, for the purposes of s.719 of the WR Act, be taken to be a single contravention of the applicable provision; and
c)section 719(2) of the WR Act is not applicable here as there is only one employee, and, therefore, only one breach of each applicable provision.
Ultra Tune’s submissions
Ultra Tune observes that the FW Ombudsman relies on Gibbs v The Mayor, Councillors and Citizens of the City of Altona[35] as authority for the proposition that there are four separate contraventions in respect of which penalties should be imposed.[36]
[35] (1992) 37 FCR 216 (“Gibbs”).
[36] Gibbs at 223 per Gray J.
Ultra Tune accepts that Gibbs was followed in McIver v Healey[37] but says that it was done without any analysis as to why the provisions of s.178(2) of the Industrial Relations Act 1988 (Cth)[38] as applied in Gibbs, and s.719 of the WR Act, as applied in McIver,[39] are in fact to the same effect. Ultra Tune then further submits that:
[37] [2008] FCA 425 (“McIver”).
[38] “IR Act”.
[39] McIver at paras.16-18 per Marshall J.
a)the material provisions of s.178(2) of the IR Act, applied in Gibbs, suggest, on a plain English interpretation, that the term of the award (or order) of which there must be two or more breaches must be a singular term. Therefore, Gibbs cannot be doubted in relation to its application to the IR Act;
b)however, pursuant to the WR Act, the breach required is no longer restricted to a particular term of an award or order but applies to “… an applicable provision” in s.719(2)(a) of the WR Act, which expression was defined in s.717 of the WR Act at the relevant time to mean:
(a) a term of one of these that applies to the person:
(i) an AWA;
(ii) the Australian Fair Pay and Conditions Standard;
(iii) an award;
(iv) a collective agreement;
(v) an order of the Commission (except one made under Division 4 of Part 9); and
(aa) section 346ZG (no‑disadvantage test compensation); and
(b) section 607 (meal breaks); and
(c) section 612 (public holidays); and
(d) section 689 (extended entitlement to parental leave); and
(e) subsection 691B(1) (prohibition of unauthorised stand downs).
c)the first question in relation to the definition of “an applicable provision” is whether “an” is conjunctive (and therefore means “an”) or disjunctive (and therefore means “or”), and as each instance which satisfies the defined expression appears to be a distinct and separate matter, it was submitted that the proper construction of the definition is that it is a list of particular instances, and if the instance does not appear in the list then Part 14 of the WR Act (in which s.719 appears) does not apply to it. Ultra Tune accepts that a term of an award is an instance to which Part 14 of the WR Act applies;
d)to the contrary, s.178(2) of the IR Act, where the contraventions had to be of “a term of” one of the two instances referred to therein, clearly suggested the singular use, while the language of s.719(2)(a) of the WR Act requires two or more breaches of an applicable provision. There is no suggestion in that language alone that it was intended to mean breaches of any applicable provision as opposed to one particular instance of the list in the definition of “an applicable provision”. This is supported by what follows because, provided there is demonstrated the same “course of conduct” in respect of each breach of an applicable provision, the balance of the paragraph requires that the two (or more) breaches “… be taken to constitute a single breach of the term.” In other words those words are in the form of a deeming provision;
e)if the above proposition is accepted then the course of conduct which allows the deeming provision to have effect so as to treat two or more breaches of one or more instances of an applicable provision as if they are a breach of only one. That is, it is no longer necessary, as it was previously, to establish that the breach is of the same particular instance of an applicable provision;
f)it accepts that the use of the expression “the term” in the balance of the section does not, at first blush, assist with this interpretation because of the use of the definite particle “the”, which suggests a choice between one “term” as opposed to another, or any other term. The difficulty with the language however, is that not only is “term” not defined anywhere in the WR Act, it is not easy to apply its use in the paragraph to any of the instances other than those referred to in s.717(a) of the WR Act where the reference is clearly to “… a term of one of these …”. It is difficult to see how the particular sections of the WR Act in instances (aa) to (e) of the definition of applicable provision in s.717 of the WR Act can be readily referred to as “terms” in this context, and at best the use of this word is ambiguous when applied to those instances;
g)if the above interpretation of the provisions is correct then:
i)the contraventions with respect to the basic periodic rate of pay and overtime for time worked outside of ordinary hours should be treated as one contravention, as the course of conduct in each instance involved the payment of a flat (albeit incorrect) rate of pay to Mr Colis. Ultra Tune accepts, however, that such a finding would be contrary to the finding on the same factual matrix in McIver;[40] and
ii)the contraventions for failure to pay in lieu of notice upon termination and severance payment on termination should be treated as one contravention as the course of conduct in each instance involved the decision to terminate the employment of Mr Colis without payment.
[40] McIver at para.18 per Marshall J.
Ultra Tune further submits that it is clear that the contraventions in relation to basic periodic rate of pay and overtime are each related to the decision, based upon incorrect advice, to pay Mr Colis at the flat rate specified by the Minister, and payment in lieu of notice and redundancy payment are both related to the decision to terminate Mr Colis’ employment after ensuring he was able to continue working with the franchisee.[41] It is therefore submitted that the discretion referred to in Gibbs, namely, that “it is possible to take into account the substance of the matter by imposing no penalty, or a nominal penalty, in respect of breaches of some terms, but a substantial penalty in respect of others”[42] is enlivened in this case.
[41] Mr Chong’s Affidavit, paras.12 and 13.
[42] Gibbs at 223 per Gray J.
Consideration
In Gibbs the Federal Court said as follows:
The object of s 178(2) appears to be that a party bound by an award and pursuing a course of conduct involving repeated acts or omissions, which would ordinarily be regarded as giving rise to a series of separate breaches, should not be punished separately for each of those breaches. If such a party has pursued a course of conduct which gives rise to breaches of several different obligations, there is no reason why it should be treated as immune in respect of its breach of one obligation, merely because it has acted in breach of another. This reasoning leads to the conclusion that each separate obligation found in an award is to be regarded as a "term", for the purposes of s 178 of the Act. The ascertainment of what is a term should depend not on matters of form, such as how the award maker has chosen to designate by numbers or letters the various provisions of an award, but on matters of substance, namely the different obligations which can be spelt out. For these reasons, I incline to the view that each separate obligation imposed by an award is to be regarded as a "term", for the purposes of s 178 of the Act. If the different terms impose cumulative obligations or obligations that substantially overlap, it is possible to take into account the substance of the matter by imposing no penalty, or a nominal penalty, in respect of breaches of some terms, but a substantial penalty in respect of others.[43]
[43] Gibbs at 223 per Gray J.
In Kelly the Federal Court was dealing with contraventions of award terms as follows:
The parties were agreed that six terms of the Award had been breached leading to the underpayment of wages to Mr Paynting. They were:
• Clause 15.1 which imposed the obligation to pay prescribed minimum rates of pay.
• Clause 12.5 which, between 8 February 2001 and 23 June 2004, imposed an obligation to pay prescribed casual loadings.
• Clause 37.2 which imposed an obligation to pay prescribed penalty rates for overtime.
• Clause 33.2.1 which imposed an obligation to pay prescribed penalty rates for work on Saturdays.
• Clause 35 which imposed an obligation to pay prescribed penalty rates for work on Sundays and
• Clause 42 which imposed an obligation to pay prescribed penalty rates for work on public holidays.[44]
[44] Kelly IR at 17 per Tracey J; FCA at para.10 per Tracey J.
In Kelly the Federal Court went on to deal with the application of the principles identified in Gibbs, and said as follows:
The parties' agreement about the identification of the terms which had been breached was founded on the construction of s 178(2) which was adopted by Gray J in Gibbs v The Mayor, Councillors and the Citizens of the City of Altona (1992) 37 FCR 216 at 223. His Honour there held that "each separate obligation found in an award is to be regarded as a "term", for the purposes of s 178 ... " His Honour further held that, in ascertaining what constitutes a "term", regard should be had "not [to] matters of form, such as how the award maker has chosen to designate by numbers or letters the various provisions of an award, but on matters of substance, namely the different obligations which can be spelt out." In the present case the parties have fixed on the particular provisions of the Award to which it was necessary to have resort for the purpose of calculating Mr Paynting's minimum legal entitlements to wages. In my view the parties were correct to approach the matter in this manner. The six "terms" which have been identified applied throughout the relevant period and, depending on the days of which Mr Paynting worked, imposed obligations on the respondents as to the level of remuneration payable to him. Whilst the Award was varied from time to time to increase the amounts prescribed by the various terms, the substantial obligation did not vary: it was that the prescribed amount should be paid to Mr Paynting.[45]
[45] Kelly IR at 17 per Tracey J; FCA at para.11 per Tracey J.
A Full Court of the Federal Court in Construction, Forestry, Mining and Energy Union v John Holland Pty Ltd[46] was dealing with alleged contraventions of right of entry provisions in the WR Act. The Full Court was required to deal with the course of conduct provisions in s.719 of the WR Act. Having set out s.719 of the WR Act one Judge of the Federal Court (with whom the other two Judges on the Full Court agreed) referred to the “[a]nalogous ‘course of conduct’ provisions … found in predecessor federal industrial relations legislation.”[47] Reference was then made to the paragraph from Kelly set out immediately above, and the following then said:
Though he noted differences in language as between s 719 of the WR Act and such earlier provisions, Tracey J in Kelly …, correctly in my respectful opinion, considered that the following observation of Gray J in Gibbs …, made in respect of the then s 178 of the Industrial Relations Act 1988 (Cth), provided an accurate guide to the meaning and effect of s 719(2) of the WR Act …[48]
Thereafter, the paragraph from Gibbs set out at paragraph 28 above in these Reasons for Judgment is set out.
[46] (2010) 186 FCR 88; [2010] FCAFC 90 (“John Holland”).
[47] John Holland FCR at 130 per Logan J; FCAFC at para.148 per Logan J.
[48] John Holland FCR at 130 per Logan J; FCAFC at para.148 per Logan J.
More recently in Fair Work Ombudsman v Ramsey Food Processing Pty Ltd (No. 2)[49] a single Judge of the Federal Court, albeit in relation to contraventions involving a number of employees, observed as follows:
2 Eleven employees were involved. Ten of those employees had not been provided with the required notice of termination of employment. Ten employees had not been paid severance pay as required. Eight employees had not been paid accrued annual leave on termination of employment as required. The applicant has contended therefore that there were 28 identifiable breaches of obligations arising directly or indirectly under the WR Act and that a penalty should be fixed for each one and imposed on each of the respondents. However, s 719(2) of the WR Act provides that where two or more breaches of an “applicable provision” under the WR Act, which includes a term of an award, arise out of the same course of conduct, they are to be treated as a single breach. On one view, the failure to make any of the required payments arose from a single course of conduct. They all arose from a determination by the respondents that no payment would be made upon the termination of employment of any of the employees, or the employees as a group. However, this approach gives insufficient attention to the separate legal character of the three forms of obligation earlier identified. I am satisfied that each of those forms of obligation requires separate recognition. I am not, however, satisfied that each individual example of defiance of an obligation is permitted separate recognition. In my view the individual examples, constituted by the failure to make payments to particular individual employees, arise out of a course of conduct in each of the three instances. Any penalty must be assessed taking that into account.
3 This approach to the legislative scheme appears to me to be consistent with the approach taken in Gibbs v The Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216 and Q R Ltd v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (2010) 204 IR 142 ; [2010] FCAFC 150 on which both parties relied (see also Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Q R Ltd (No 2) [2010] FCA 652 at [16]–[28]).
4 It follows that there are three matters which require a penalty to be assessed: failure to provide the requisite notice of termination of employment to ten employees; failure to pay severance pay to ten employees; and failure to pay accrued annual leave on termination of employment to eight employees. The maximum penalty available in each case is $33,000 in the case of a corporation and $6,600 in the case of an individual.[50]
[49] [2012] FCA 408 (“Ramsey Food Processing (No. 2)”).
[50] Ramsey Food Processing (No. 2) at paras.2-4 per Buchanan J.
The same approach to s.719(2) of the WR Act has been adopted in this Court. In Fair Work Ombudsman v Futures Green Pty Ltd & Anor[51] this Court having referred to s.719(2) of the WR Act, and summarised its content, and having referred to reg.14.5 of Chapter 2 of the Workplace Relations Regulations 1996 (Cth), which is to similar effect as s.719(2) of the WR Act, went on as follows:
[51] [2011] FMCA 412 (“Futures Green”).
[50] I have found that the first respondent breached:
a) s 182 of the WRA;
b) clause 6(a) of the Nurseries NAPSA;
c) clause 11 of the Nurseries NAPSA;
d) s 4(3)(b)(ii) of the Annual Holidays NAPSA;
e) reg 19.9(1) of chp.2 of the Regulations; and
f) reg 19.11(3) of chp.2 of the Regulations.
[51] …
[52] The first respondent’s failure to pay overtime, penalty rates and annual leave appears, as was submitted by the Ombudsman, to have arisen out of a single course of conduct as
… one decision was made by the First Respondent to pay the Employees the incorrect hourly base rate below the APCS and which was not sufficient to satisfy overtime rates, annual leave loading (for permanent employees) and pro rata annual leave (for casual employees).
[53] It can also be accepted, as submitted by the Ombudsman, that the failure to keep proper records was one course of conduct
… as one decision was made by the First Respondent to only make and maintain records which demonstrated the total number of hours worked in each pay period and which did not include the [prescribed] content in relation to overtime rates and penalty rates.
[54] However, the Ombudsman did not concede that the contraventions of the various statutory, regulatory or NAPSA-based provisions were anything other than separate breaches and I conclude that they should be considered to be separate breaches.[52]
[52] Futures Green at paras.50-54 per Cameron FM.
In support of the conclusion that there were separate breaches the passage in Gibbs set out at paragraph 28 above was quoted, and an interpolation in that quote indicates that s.178(2) of the IR Act is “a previous version” of s.719(2) of the WR Act.[53]
[53] Futures Green at para.54 per Cameron FM.
The judgments of the Full Court of the Federal Court and single Judges of the Federal Court cited above are directly on point, and therefore binding on this Court.[54] It is long settled, on the basis of the rationale set out in cases such as Gibbs, Kelly, McIver, John Holland, Ramsey Food Processing (No. 2) and Futures Green (and many others which it is unnecessary to refer to in these Reasons for Judgment), that contraventions of the type alleged in this case are to be treated as separate contraventions.
[54] Minister for Immigration and Multicultural and Indigenous Affairs v SZANS (2005) 141 FCR 586 at 592 per Weinberg, Jacobson and Lander JJ; [2005] FCAFC 41 at paras.36-39 per Weinberg, Jacobson and Lander JJ; Lee & Ors v Minister for Immigration & Multicultural Affairs & Anor (2006) 205 FLR 117 at 133 per Driver FM; [2006] FMCA 480 at para.28 per Driver FM; See v Granich & Associates [2008] FMCA 27 at paras.16-18 per Lucev FM; Suh & Ors v Minister for Immigration & Citizenship & Anor (2009) 175 FCR 515 at 522 per Spender, Buchanan and Perram JJ; [2009] FCAFC 42 at para.29 per Spender, Buchanan and Perram JJ. Also, see the helpful recent article by Oliver Jones in the Australian Law Journal: O Jones “When is the Federal Magistrates Court bound by the Federal Court?” (2012) 86 ALJ 478.
It follows that each of the four contraventions in this matter is a separate contravention of a separate legislative or award provision, and there is no basis under s.719(2) of the WR Act for treating the contraventions as anything other than separate contraventions.
Size of business and capacity to pay
FW Ombudsman’s submissions
The FW Ombudsman’s submissions dealt with the size of the business, as follows:
a)the evidence with respect to the size of the business and how many employees it employed is limited, although Ultra Tune operated a franchise business as franchisor with a network of independent franchisee service centres across the country;
b)the size of the business does not absolve Ultra Tune of its legal responsibility to comply with the law in relation to the employment of its employees;
c)in Workplace Ombudsman v Saya Cleaning Pty Ltd[55] this Court said as follows:
[55] [2009] FMCA 38 (“Saya Cleaning”).
The Respondent is a small company and, I infer, has very few assets. However, as Justice Tracey said in Kelly v Fitzpatrick:
‘No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction must be imposed at a meaningful level.’[56]
[56] Saya Cleaning at para.26 per Simpson FM citing Kelly IR at 21 per Tracey J; FCA at para.28 per Tracey J.
d)in Rajagopalan v BM Sydney Building Materials Pty Ltd[57] this Court said as follows:
Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to a court’s consideration of penalty.[58]
e)that Ultra Tune’s financial situation should have no impact on assessment of penalty, citing Printed and Kindred Industries Union & Ors v Vista Paper Products Pty Ltd & Anor[59] where the Industrial Relations Court of Australia in penalising both a company in receivership and its bankrupt controlling director said as follows:
While this evidence suggests that both Vista and Mr McNamee may have difficulty in paying penalties, I do not think I should allow it to deflect me from imposing whatever penalties are otherwise appropriate.[60]
f)that it is clear that the size of the business provides no excuse for non-compliance, and that the Court ought impose penalties taking into account the principles set out in the above submissions.
[57] [2007] FMCA 1412 (“Rajagopalan”).
[58] Rajagopalan at para.27 per Driver FM.
[59] (1994) 127 ALR 673 at 688 per Wilcox CJ (“Vista”).
[60] Vista at 688 per Wilcox CJ.
Ultra Tune’s submissions
Ultra Tune submits that its size and financial resources were relevant to the imposition of penalty. Mr Chong’s evidence was that Ultra Tune employs 17 full-time staff, and that excluding himself (as corporate solicitor), the “company accountant” and an unspecified number of “secretarial staff”, all other employees are now, or formerly were, qualified motor mechanics or vehicle repairmen.[61] It was submitted that Ultra Tune was therefore only a little more than a “small” employer, as defined in the Vehicle Industry Award to mean an employer of not more than 15 employees,[62] and that it did not have relevant in-house expertise with respect to labour migration law matters.
[61] Mr Chong’s Affidavit, para.4.
[62] Vehicle Industry Award, cl.43.
No evidence as to Ultra Tune’s income or profit was given, although there was evidence that Ultra Tune had “significant long term and large financial commitments” which it “is obligated to meet over the next quarter” and which would “have a significant negative effect on its cash flow for at least that period.”[63] No detail of these matters was provided, and, in any event, the plea was made in support of a request (made in Mr Chong’s Affidavit) for an extension of time in which to pay any penalty. There was no suggestion that Ultra Tune did not have capacity to pay any penalty imposed.[64]
[63] Ms Chong’s Affidavit, para.19.
[64] Mr Chong’s Affidavit, para.19.
Consideration
The FW Ombudsman submits that a respondent’s financial situation should have no impact on assessment of penalty. A similar submission was put in Fair Work Ombudsman v MMP Management Services Pty Ltd & Anor[65] where this Court observed in response that:
Properly evidenced, and for proper reasons, incapacity to pay may afford some relief by way of mitigation of penalty.[66]
[65] [2012] FMCA 207 (“MMP Management Services”).
[66] MMP Management Services at para.39 per Lucev FM.
The Court made the observation quoted above from MMP Management Services having regard to the extensive treatment of this issue in Workplace Ombudsman v KSN Engineering Pty Ltd[67] and Olsen v Sterling Crown.[68] Despite its length, it is worth reiterating what this Court said in Sterling Crown:
[67] (2009) 185 IR 316 at 322-323 per Lucev FM; [2009] FMCA 538 at paras.10 and 13 per Lucev FM (“KSN Engineering”).
[68] Sterling Crown IR at 352-356 per Lucev FM; FMCA at paras.58-76 per Lucev FM.
59. The applicant says that no reduction in the quantum of penalty should be afforded to the respondent because of the small size of the Business, citing Macpherson and Kelly. In Kelly the Federal Court said:
“The respondents have expressed contrition and have put in place mechanisms which are designed to ensure that there will be no repetition of the breaches which have led to the present proceeding. Specific deterrence does not, therefore, loom large as a consideration in determining penalty. It does not follow that the need for general deterrence may be disregarded. As Finkelstein J said in CPSU v Telstra Corporation Limited (2001) 108 IR 228 at 231: "even if there be no need for specific deterrence, there will be occasions when general deterrence must take priority, and in that case a penalty should be imposed to mark the law’s disapproval of the conduct in question, and to act as a warning to others not to engage in similar conduct ..." No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction "must be imposed at a meaningful level": see Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd [2001] ATPR 41-815 at [13].”
60. In Macpherson this Court reiterated observations it had made in Rajagopalan v BM Sydney Building Materials Pty Ltd where this Court said:
“Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to the Court’s consideration of penalty.”
61. The Court in Rajagopalan then went on to cite the final two sentences of the quote from CPSU, The Community and Public Sector Union v Telstra Corporation Limited set out in the above extract from Kelly.
62. More recently in Longmire v Murray Clarke Enterprises Pty Ltd & Anor the same quote from CPSU v Telstra is set out, and then this Court’s judgment in Pow Juice is quoted:
“Difficulty in paying penalties should not prevent the Court from imposing penalties which are otherwise appropriate…If the circumstances require a substantial penalty to be imposed, the financial difficulty itself will not deter the imposition of a penalty.”
63. The size and financial resources of a contravener are factors to be taken into consideration in determining penalty, that penalty to be determined having regard to all of the relevant circumstances of the case. Macpherson and Kelly are not authorities to the contrary. In Kelly the Federal Court expressly adopted as a relevant and applicable consideration the size of the business enterprise involved, following this Court’s judgment in Harrington Corporation.
64. In Macpherson where reliance was placed upon Rajagopalan the size of the company was a factor, although there the Court said that it should be of limited relevance to the Court’s consideration of penalty. Thus, in both the cases cited by the respondent the size of the corporation concerned has been taken into account as a factor.
65. In Kelly the Federal Court did not disavow size as a factor to be considered in relation to penalty. What the Federal Court there said was:
a) regardless of size, corporate employers are obliged to meet minimum employment standards;
b) when corporate employers do not meet minimum employment standards it will be normal to impose an “appropriate” monetary sanction; and
c)the sanction must be at a meaningful level.
66. The size of the employer is relevant to a consideration of what the “appropriate” sanction is, and whether that sanction is at a meaningful level. Whether any reduction ought to be afforded to an employer by reason of the size of the corporation concerned is a matter for consideration having regard to the particular circumstances of each case. In ACCC v ABB Transmission and Distribution Limited (No.2) the Federal Court in imposing penalties in relation to contraventions of ss.45 and 45A of the Trade Practices Act 1976 (Cth) specifically took account of:
a) the difference in size and scale of the operations of the offending corporations;
b) the fact that shares were tightly held in two of the companies which were private, whilst the third was a subsidiary of a large international public company; and
c) the size of the parent company of the subsidiary company,
in determining the penalties to be imposed.
67. In ABB Transmission (No.2) the Federal Court went on to expressly find that:
“In determining the appropriate penalty it is also necessary to have regard to the capacity of the parties to bear the penalty.”
68. The Federal Court also took into account in setting penalty a concern that the size of the penalty would not affect one corporation’s ability to trade, observing that it would “be incongruous if a penalty for an anti-trust violation had an anti-competitive effect.”
69. It might be said that these were considerations within the case in relation to the so called “parity principle”. But in ABB Transmission (No.2) the Federal Court expressly found that the parity principle “should not prevent the court from carefully assessing the significance of a particular penalty for a particular corporation.” It might also be said that those considerations are particular to contraventions of trade practices legislation involving abuse of market power where the size of the corporation might be of particular relevance. But questions of power, and the power disparity between an employer and an employee, are relevant in this case. They are relevant because the purpose for maintaining employment records is to allow their inspection by workplace inspectors so as to facilitate compliance with industrial instruments and minimum employment standards. The power disparity between an employer and an employee, possibly arising from the size and financial resources of the employer, has been recognised as a factor which may impact upon the negotiation of terms and conditions of employment. If the size and financial resources of a corporation in relation to an abuse of market power are relevant, then the size and financial resources of an employer might also be relevant to an abuse of employment power which might be revealed by an inspection of employment records. Therefore the size and financial resources of the employer are relevant factors for consideration in this case.
70. In ASC v Forem-Freeway Enterprises Pty Ltd & Ors the Federal Court in a corporations matter was dealing with an application for a pecuniary penalty in relation to a failure to keep accounting records. The Federal Court took into account whether or not the individual concerned had the capacity to pay a substantial penalty. The individual concerned was bankrupt, but any penalty would survive the bankruptcy, and the Federal Court observed that the bankrupt would emerge from the bankruptcy indebted to the Commonwealth, and that if he had no capacity to pay, the infliction of such a debt by way of penalty was “a somewhat pointless exercise.” The Federal Court however took account of the fact that the individual concerned might come into funds in the future and might be able to pay a penalty at a future time, and therefore ordered that there be liberty to apply in relation to the imposition of a penalty.
71. This Court has previously said that:
“There is an established principle in setting penalties for both individuals and corporations that regard is had to their financial position, and more particularly their capacity to pay.”
72. There is nothing new in the size and financial resources of the employer (be it a corporation or otherwise) being considered in setting penalties in industrial law matters. In PKIU v Vista Paper Products Pty Ltd the then Chief Justice of the Industrial Relations Court of Australia said:
“In determining what monetary penalty to impose on an offender it is usual for a court to take into account the offender’s capacity to pay. A monetary sum that would constitute a reasonable penalty to a person of average income might be unduly oppressive if imposed on an impecunious person.”
73. In Textile Clothing and Footwear Union of Australia v Lotus Cove Pty Ltd the Federal Court as a factor in mitigation of penalty had regard to the fact that the employer respondent was a small enterprise upon whom the imposition of a large fine was likely to be oppressive.
74. In Australian Nursing Federation v Alcheringa Hostel the Federal Court had regard to the following:
“Alcheringa is a community-based non-profit organisation that has been in difficult financial straits for the last few years. It did not seek to reduce labour costs so as to increase the wealth of itself or any shareholders. Rather, it acted on a perception, real or otherwise, that it was essential for its financial survival for medication to be administered by persons other than Division 1 nurses. I have also borne in mind that a heavy financial penalty will divert already scarce resources from Alcheringa’s residents and the community it serves.”
75. As with cases under the trade practices legislation where the financial resources of a contravener are considered to ensure that the penalty does not have an anti-competitive affect by removing potential competitors from the market, so in industrial law proceedings the financial resources of a contravener must also be considered. There would be a none too subtle irony in the imposition of a penalty which caused an employer to close a business, resulting in:
a) unemployment, a circumstance potentially contrary to two of the principal objects of the WR Act, namely:
i) “encouraging the pursuit of high employment”; and
ii) “protecting the competitive position of young people” and “promoting youth employment”; or
b) non-payment of entitlements.
76. It therefore appears that the size and financial resources of a contravener are factors to be considered, and the impact of those factors upon the setting of penalty is in each case a matter for consideration of the particular circumstances of the size and financial resources of the contravener, plus the other factors which are relevant.[69]
[69] Sterling Crown IR at 352-356 per Lucev FM; FMCA at paras.59-76 per Lucev FM (footnotes omitted).
It is significant to note that, contrary to the FW Ombudsman’s submission that Vista supports the proposition that a respondent’s financial situation should have no impact on assessment on penalty, in Vista the Industrial Relations Court of Australia specifically said that a respondent’s capacity to pay was to be taken into account because a reasonable penalty for one person might be unduly oppressive for another person, for example, an impecunious person.[70]
[70] Vista ALR at 686 per Wilcox CJ.
It is also worth observing that in Saya Cleaning the Court did not actually express a view as to whether or not the size and financial resources of a contravener ought to affect penalty. Rather, it quoted from various judgments and said that the Court would take into account what was said in those judgments in imposing penalties.[71] The Court in Saya Cleaning was not referred to the Court’s discussion of the issue, and extensive review and rationalisation of the relevant authorities, including authorities cited in Saya Cleaning, in Sterling Crown. As such, Saya Cleaning cannot be considered authority for the proposition that the size and financial resources of a contravener, or its capacity to pay, can be ignored, or not considered, when this Court determines penalty, because:
a)the Court did not say that in Saya Cleaning; and
b)if it did say so, it is inconsistent with binding authority of the Federal Court and the Industrial Relations Court of Australia to the contrary.
[71] Saya Cleaning at para.31 per Simpson FM.
In Rajagopalan where it is initially said that size is a factor of limited relevance to the Court’s consideration of penalty,[72] the Court went on to say that the effect the imposition of a penalty may or may not have on the respondent’s business should not be taken into account when imposing a penalty.[73] However, that is also contrary to Federal Court authority in relation to the imposition of civil penalty provisions cited in Sterling Crown, particularly where the imposition of a penalty which would have an effect contrary to the objects of the relevant legislation, has been held to be a matter for consideration in the imposition of penalty.[74]
[72] Rajagopalan at para.27 per Driver FM.
[73] Rajagopalan at para.29 per Driver FM.
[74] Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited (No. 2) (2002) 190 ALR 169 at 180-181 and 183 per Finkelstein J; [2002] FCA 559 at paras.40, 42 and 50 per Finkelstein J; Trade Practices Commission v CSR Limited (1991) ATPR 41-076 at 52,152 per French J; Australian Securities Commission v Forem-Freeway Enterprises Pty Ltd & Ors (1999) 30 ACSR 339 at 351-352 per Madgwick J.
The Federal Court judgments cited in Sterling Crown, and the Industrial Relations Court of Australia judgment in Vista, as superior courts to this court in the federal courts hierarchy, are binding on this Court and must be applied unless they are plainly wrong.[75] For the reasons set out at length in Sterling Crown the Court is of the view that the Federal Court judgments there cited, and the Industrial Relations Court of Australia’s judgment in Vista, are plainly right insofar as they say that:
a)a respondent’s size and capacity to pay do not provide any excuse for not complying with relevant workplace relations obligations, be they imposed by legislation or by industrial instrument; and
b)size and capacity of the respondent to pay are relevant to the assessment of penalty, having regard to any relevant evidence with respect to size and capacity to pay of the respondent.
[75] See footnote 54 above.
More recently, the Federal Court has had regard in assessing penalty to the fact that a contravener is a large sized, successful, well resourced business with dedicated human resources staff able to obtain competent legal advice about the importance of compliance with workplace laws.[76]
[76] Fair Work Ombudsman v Offshore Marine Services Pty Ltd [2012] FCA 498 at para.27 per Gilmour J.
In this case, the evidence establishes little beyond the fact that Ultra Tune runs, through franchisees, service centres nation wide, to which it provided labour, including Mr Colis’ labour, prior to ceasing that arrangement. Whilst there is evidence of a short term cash flow problem, there is no evidence of any long term incapacity to pay any penalty imposed by this Court. Overall, nothing in the materials before the Court indicates that the size of Ultra Tune’s business, or its capacity to pay, is a factor which warrants any reduction in the penalty which would otherwise be imposed.
Deliberateness of the contraventions
FW Ombudsman’s submissions
The FW Ombudsman submitted that the contraventions by Ultra Tune were essentially an inadvertent disregard for its statutory obligations. The inadvertent disregard was not isolated, but related:
a)on the one hand to the obligation to pay Mr Colis at least the basic periodic rate of pay and overtime throughout the period in which he was employed; and
b)on the other hand to pay Mr Colis his proper entitlements owing on termination, and, in particular, his severance payment.
Ultra Tune’s submissions
Ultra Tune submits that:
a)if its actions were an inadvertent disregard for its obligations, regard should be had to Cotis v McPherson.[77] In McPherson Ultra Tune submits that this Court, as a basis for finding disregard, accepted evidence that Mr McPherson had been made aware of some award contraventions by employees whilst his business was still in operation, and before the then Workplace Ombudsman began investigating the matter. Therefore, Mr McPherson’s actions were judged on the basis that he had knowledge of the circumstances giving rise to the contraventions but had failed to remedy the situation.[78] This, and the fact that Mr McPherson claimed that he was unable to remedy his contraventions (which ran over a 10 year period) because of the failure of his business and bankruptcy, was the primary reason why it was held in that case that general deterrence was of such importance to the result;[79]
b)it did not disregard its obligations in relation to the basic periodic rate of pay and overtime whether inadvertently or otherwise, because it was misled by its legal advice as to its obligations.[80] But for this advice, it would never have contravened its obligations at all;
c)it was a party to the original Vehicle Industry Award so it is not asserted, as was the position in Kelly, that the employer was unaware of the relevant award, or, that it was covered by it. Therefore, unlike other cases where it has been recognised that there is an obligation on an employer to find out about award coverage, this is a case where the employer acted under a mistaken belief as to its obligations, and that mistaken belief lasted for the entire 18 month period that Mr Colis was employed; and
d)in this case it is of note that Ultra Tune:
i)has only 17 full-time employees which is only 2 more than is required to be defined in the Vehicle Industry Award as a “small employer”,[81] and its size is not such as to allow the presumption that it should know its obligations in the special circumstances relating to subclass 457 visas, as it did not have any person on staff with an industrial relations background or expertise and was reliant upon outside advice in relation to labour migration law matters;[82]
ii)had never engaged in bringing in labour to Australia under subclass 457 visas previously, and got advice from what it assumed were competent lawyers (who were also registered migrations agents) which it did not know was incorrect until after the contraventions had occurred;[83]
iii)unlike the award system which is well-publicised, supported on the internet by Unions and relevant government agencies and other authorities like the FW Ombudsman, and, arguably through length of use well-known, such that the community recognises that it is a system which employers should know about, the sub-class 457 visa procedures are relatively new and, the particular obligations under the Migration Regulations are not well-publicised, and are even difficult to find in the Migration Regulations themselves;
iv)further, the Department of Immigration advice to business sponsors did not assist any greater understanding of the possibility that an employer may have to pay sponsored employees a sum higher than that specified by the Minister, as there was no reference in such specifications to the possibility that there may be additional obligations under an industrial instrument (such as an award) or legislation (such as the WR Act), and, in this case, the lawyer’s standard advice by e-mail appears to have perpetuated this omission;[84] and
v)entered into the business of bringing in labour to Australia under sub-class 457 visas at the behest of and so as to fulfil the needs of others, namely, its franchisees, each of which have their own separate businesses, so it was clearly not motivated by profit, for example, to reduce its labour costs because of some perceived benefit in paying less wages.[85]
[77] (2007) 169 IR 30 at 41 per Driver FM; [2007] FMCA 2060 at para.17 per Driver FM. (“McPherson”).
[78] McPherson IR at 41 per Driver FM; FMCA at para.18 per Driver FM.
[79] McPherson IR at 42 per Driver FM; FMCA at paras.22-23 per Driver FM.
[80] Mr Chong’s Affidavit, para.7.
[81] See Vehicle Industry Award, cl.43.
[82] Mr Chong’s Affidavit, para.4.
[83] Mr Chong’s Affidavit, paras.3, 7, 9 and 10 and Annexure 2.
[84] Mr Chong’s Affidavit, para.9 and Annexures 2 and 2a.
[85] Mr Chong’s Affidavit, paras.3 and 5.
Consideration
The Court accepts that Ultra Tune did not set out to deliberately contravene the WR Act or the Vehicle Industry Award. Further, as has already been said, the Court accepts that the actual contraventions occurred because of incorrect advice given to Ultra Tune by its lawyers and migration agents. Further, it is fair to observe that, as the Court has again observed above, it is not difficult to understand why even lawyers and registered migration agents would have given the incorrect advice to Ultra Tune given the form and content of reg.2.79 of the Migration Regulations, and other associated regulations. Even the FW Ombudsman admits that the contraventions by Ultra Tune were, at worst, inadvertent.
In the circumstances penalty cannot be assessed on the basis that the contraventions were deliberate, but rather an unintended and inadvertent outcome as a consequence of incorrect advice from lawyers and registered migration agents, arising from an understandable misinterpretation of a convoluted regulatory scheme.
Contrition, corrective action, co-operation with the enforcement authorities
FW Ombudsman’s submissions
There is no dispute that the submission made by the FW Ombudsman that:
… there has been full co-operation on the part of the Respondent in these proceedings through their early admission of liability with respect to the contraventions and by entering into an Agreed Statement of Fact and Admissions …
is correct.
Ultra Tune’s submissions
Ultra Tune submits that:
a)its culpability is at the lower end of the range, and that is not disputed by the FW Ombudsman, but it is also important to consider the proper weight and acknowledgement that should be given to the admission of culpability which obviously assisted the case to be determined expediently and at a minimum of cost and inconvenience to everyone concerned. In this case it is a credible expression of regret and indicates a willingness to facilitate the course of justice;
b)it is also significant that Ultra Tune has done everything it could do to remedy the loss to the employee well before the proceedings were even issued. Since the considerations in regard to penalty are not closed it submitted that a proper exercise of discretion should have regard to the loss suffered by Ultra Tune paying for labour effectively provided to its franchisee when assessing the penalty, because this type of conduct on the part of employers should be encouraged, rather than discouraged by meting out a harsh penalty on top of the losses. Therefore it is submitted the correct exercise of the discretion is that the full usual discount for co-operation should be given;
c)there are dramatic differences between Ultra Tune’s position and that of Fair Work Ombudsman v Nu Life Organic Farms Pty Ltd and Ors[86] relied upon by the FW Ombudsman. In that case the amount of entitlements unpaid was more than double the amount in this case, and the Court not only held the behaviour to be reckless disregard of the employer’s statutory obligations,[87] there was also clearly no contrition and the breaches were held to be serious,[88] which is not asserted by the FW Ombudsman in this case. The proper exercise of discretion would produce a penalty of substantially less than the $15,000 per contravention which was considered by the Court to be appropriate in Nu Life; and
d)as regards Fair Work Ombudsman v Wi-Man and Ors[89] the facts are much more similar, and the amount of underpayment in this case is only a few thousand dollars more. The differences, however, include that the employer had not made payment to the affected employee until shortly prior to the proceedings being heard,[90] was found not to have co-operated at all during the investigation process,[91] and was “stupid and bloody-minded” in relation to its dealings with the particular employee,[92] none of which can be suggested to apply to Ultra Tune. If there is any distinction to be drawn from Wi-Man it is that the proper exercise of discretion would produce a penalty of less than the $2,640 per contravention[93] which was considered overall by the Court to be appropriate for that case. This does not derogate from the submissions that the contraventions in relation to payment in lieu of notice and severance payment are considered to be deserving of nominal penalties.
[86] [2010] FMCA 694 (“Nu Life”).
[87] Nu Life at para.60 per Jarrett FM.
[88] Nu Life at para.67 per Jarrett FM.
[89] [2011] FMCA 322 at para.44 per Burnett FM (“Wi-Man”).
[90] Wi-Man at paras.47-51 per Burnett FM.
[91] Wi-Man at paras.47-51 per Burnett FM.
[92] Wi-Man at para.64 per Burnett FM.
[93] Wi-Man at para.64 per Burnett FM.
Consideration
The fact that there has been full co-operation with the FW Ombudsman by Ultra Tune, and an early admission of liability, are both indicators of a degree of contrition by Ultra Tune. The co-operation and admissions are sufficiently significant for the Court to be able to infer that they are resulted in significant monetary and resource expenditure savings for both the FW Ombudsman and the Court. There has been no overt expression of contrition however by Ultra Tune, either by way of affidavit evidence, or even the less acceptable expression of apology through Counsel. Despite there being no overt expression of contrition by Ultra Tune it is clear that the co-operation and admissions have been made with a view to facilitating the course of justice in these proceedings, and as such warrant a significant reduction in overall penalty.
The Court does not consider it appropriate to reduce penalty for the “loss” allegedly suffered by Ultra Tune for labour provided to its franchisee. It is admitted that Ultra Tune was the employer,[94] and it cannot therefore legitimately assert that it suffered a “loss” by paying Mr Colis his proper entitlements.
Ensuring compliance with minimum standards
[94] Agreed Statement, paras.3 and 4.
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)the principle objects of the WR Act emphasise the importance of an effective safety net of minimum terms and conditions of employment together with effective enforcement of those minimum standards;
b)the provisions concerning compliance, at Part 14 of the WR Act are means by which the WR Act seek to give effect to the principal objects in the WR Act;
c)the importance of the “safety net” is reflected not only in the magnitude of the maximum penalties available in respect of any contravention of an applicable provision, but also in the Parliament’s increase in maximum penalties in August 2004[95] from $2,000 to $6,600 for individuals and from $10,000 to $33,000 for bodies corporate; and
d)in recent cases, the Court has treated the contravention of workplace laws seriously and has handed down significant penalties against employers for contraventions.[96]
[95] Workplace Relations Amendment (Work Choices) Act 2005 (Cth).
[96] Details of which were provided in submissions.
Ultra Tune’s submissions
Ultra Tune accepts that minimum standards have not been complied with in this case. However, it repeats submissions otherwise made in relation to the issue of the deliberateness of the contraventions which explain why it is that the minimum standards set by the WR Act and the Vehicle Industry Award were not complied with, and why the lower standard set by the Minister’s specifications for salary payments for sub-class 457 visa recipients was thought to be all that was necessary to be paid to Mr Colis in the circumstances.
Consideration
In assessing the seriousness of the conduct by Ultra Tune, and what level of penalty might be imposed, the Court must have regard to the statutory purposes of the WR Act.[97] Relevantly, the objects of the WR Act included:
(c) providing an economically sustainable safety net of minimum wages and conditions for those whose employment is regulated by this Act; and
(d) ensuring that, as far as possible, the primary responsibility for determining matters affecting the employment relationship rests with the employer and employees at the workplace or enterprise level; and
(e) enabling employers and employees to choose the most appropriate form of agreement for their particular circumstances; and
(f) ensuring compliance with minimum standards, industrial instruments and bargaining processes by providing effective means for the investigation and enforcement of:
(i) employee entitlements; and
(ii) the rights and obligations of employers and employees, and their organisations; and
(g) ensuring that awards provide minimum safety net entitlements for award‑reliant employees which are consistent with Australian Fair Pay Commission decisions and which avoid creating disincentives to bargain at the workplace level …[98]
[97] Workplace Ombudsman v Golden Maple Pty Ltd (2009) 186 IR 2011 at 235 per Lucev FM; [2009] FMCA 664 at para.63 per Lucev FM.
[98] WR Act, s.3(c)-(g).
In the context of the objects of the WR Act requiring compliance with minimum standards, contraventions, even if inadvertent, with respect to basic periodic rate of pay, overtime and termination payments, extending over a period of time, and albeit only in relation to one employee, involve an undermining of the statutory objects and purposes of the WR Act as set out above. In that context, a meaningful penalty is appropriate. A meaningful penalty must however, have regard to the other factors for consideration, and in this case recognise that the contravention of minimum standards was far from the most serious category of contravention, and was not deliberate.
Specific and general deterrence
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)it is well established that deterrence is a relevant factor in the imposition of a penalty,[99] and that in this matter there is a need for both specific and general deterrence;
b)the need for specific deterrence in this matter arises so as to deter Ultra Tune from paying future employees at a rate that is less than the guaranteed basic periodic rate of pay; and
c)in considering the need for general deterrence in determining the appropriate penalty the Court should have regard to the message sent, in the imposition of penalties, to employers and the community generally that underpayment of wages will not be tolerated, particularly where vulnerable employees are involved.[100]
[99] Caelli Constructions FCR at 559-560 per Lander J; FCAFC at para.93 per Lander J.
[100] Caelli Constructions FCR at 559-560 per Lander J; FCAFC at para.93 per Lander J; CPSU, The Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228 at 231 per Finkelstein J; [2001] FCA 1364 at para.9 per Finkelstein J.
Ultra Tune’s submissions
Ultra Tune submits that:
a)to the extent that it is submitted by the FW Ombudsman that specific deterrence is required in this case to deter future contraventions by Ultra Tune, it is clear that such a circumstances is never likely to occur in the future. In 2007 Ultra Tune decided it would no longer act as a business sponsor, and, in any event, it is now aware of its obligations if the situation should ever arise again.[101] Additionally, in well over 20 years Ultra Tune has never been cited for any breach of the Vehicle Industry Award. It has actually employed persons and paid them pursuant to the Vehicle Industry Award in the past. It can therefore be safely said that, with the exception of the period in which these matters occurred, it has been a model corporate citizen as regards compliance with its workplace obligations. It should therefore be given the benefit of the doubt when it says the matters the subject of these proceedings will never occur again, and that due to the advice it has now received it would, if the circumstances arose again, properly understand its obligations. It is appropriate to say this would also demonstrate that Ultra Tune has “taken steps to change its practices” so that the harm will not occur again; and
b)the need for general deterrence is also rejected in this case. It is relevant to this enquiry to establish whether there is some evidence available that this is a common occurrence which needs attention drawn to it by the penalty.[102] It is submitted there is no evidence that this is other than an isolated instance caused solely by Ultra Tune having been misled as to its obligations. Common experience would suggest it is extremely unlikely that such circumstances are common in regards to business sponsors who receive proper advice. The need to warn others not to engage in similar conduct does not appear apposite to the facts of this case.
[101] Mr Chong’s Affidavit, paras.10 and 12.
[102] Mason at paras.51-55 per Mowbray FM.
Consideration
A primary objective of penalties is deterrence.[103] Therefore, in imposing civil penalties, deterrence is a significant consideration.[104] It is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend.[105] Therefore it must be of a kind that demonstrates an appropriate assessment of the seriousness of the offending conduct.[106]
[103] Kelly IR at 21 per Tracey J; FCA at para.28 per Tracey J; Leighton Contractors Pty Ltd v Construction, Forestry, Mining and Energy Union (2006) 164 IR 375 at 391 per Le Miere J; [2006] WASC 317 at para.74 per Le Miere J; Sterling Crown IR at 351 per Lucev FM; FMCA at para.53 per Lucev FM.
[104] Caelli Constructions FCR at 577 per Jessup J; FCAFC at para.164 per Jessup J
[105] Caelli Constructions FCR at 559 per Lander J; FCAFC at para.93 per Lander J, citing Yardley v Betts (1979) 22 SASR 108; Kelly IR at 21 per Tracey J; FCA at para.28 per Tracey J.
[106] Caelli Constructions FCR at 559 per Lander J; FCAFC at para.93 per Lander J.
In this case, where Ultra Tune has made payment to the employee concerned, no longer employs employees directly to work in its franchised service centres, has otherwise paid employees their award obligations, and where there has been a significant measure of contrition and co-operation, including admissions, the Court is satisfied that there is not a significant requirement for specific deterrence in this case, but rather an appropriate and meaningful level of general deterrence.
General deterrence is an important and relevant consideration in assessing penalty, in order to mark disapproval of the conduct in question, and to act as a warning to others not to engage in similar conduct.[107] A meaningful measure of general deterrence is appropriate so that employers are not impressed with the idea that they can avoid payment of employee’s minimum entitlements, such as occurred in this instance.
[107] Klousia v TKM Investments Pty Ltd & Anor [2009] FMCA 208 at para.55 per O’Sullivan FM; Industrial Roadpavers IR at 447 per Lucev FM; FMCA at para.37 per Lucev FM.
No penalties imposed by way of general deterrence should be so crushing as to force a corporation out of business, and its employees out of employment, for that would be a circumstance contrary to the objects of the WR Act.[108]
[108] WR Act, s.3(a) – “encouraging the pursuit of high employment”.
General deterrence must be appropriate and meaningful, and in this case that entails a proper consideration of all of the circumstances, including the inadvertent nature of the failure to afford Mr Colis his minimum entitlements by reason of the provision of incorrect advice from professional advisers. Any employer deliberately contemplating similar contraventions in the future would therefore understand that a higher penalty was likely to be imposed for such deliberate conduct.
The penalty to be imposed will take account of the requirement of general deterrence, but a low level of general deterrence given the circumstances of these contraventions.
The totality principle
The parties are not at odds with respect to the application of the totality principle, or the proper nature and application of the totality principle. Essentially, the totality principle requires the Court, once it has made a judicial evaluation of what it considers to be an appropriate aggregate penalty, to examine one final time, the aggregate penalty in order to determine whether it appears wrong.[109]
Conclusions as to penalty
[109] Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 at 397 and 408 per Stone and Buchanan JJ; [2008] FCAFC 70 at paras.42-43 and 91 per Stone and Buchanan JJ; Australian Ophthalmic Supplies FCR at 567-568 per Gray J and 577 per Graham J; FCAFC at paras.27-28 per Gray J and 78 per Graham J.
FW Ombudsman’s submissions
The FW Ombudsman submits that:
a)in determining penalty, the Court should have regard to comparable decisions in this and other jurisdictions;[110]
b)this is an appropriate case to impose a penalty at the low range of the maximum penalty in respect of each of the contraventions; and
c)any penalties imposed be paid to the Commonwealth pursuant to s.841 of the WR Act within 30 days.
[110] A summary table of relevant cases and penalties was provided by the FW Ombudsman.
Ultra Tune’s submissions
Ultra Tune submit that:
a)the Court ought to determine penalty in this case based on the facts and circumstances of this case, and that it is inappropriate to determine penalty by way of precedent;
b)if any penalty is to be imposed, then it is appropriate that a penalty at the low range of the maximum penalty for each contravention be imposed, but particularly in relation to the severance payment contravention a nominal or no penalty ought to be imposed; and
c)for reasons set out above,[111] if any penalty is imposed Ultra Tune seeks more than 30 days in which to pay.
[111] See para.39 above.
Consideration
The Court agrees with the parties that the penalty in respect of these matters ought to be at the lower end of the penalty spectrum, that is to say under 20% of the maximum penalty for each penalty.
Penalty is not to be assessed by a comparison with existing decided cases, that is, precedent does not determine penalty for particular cases. Previous cases might set a broad band within which a particular penalty, if it falls, might be considered to be reasonable, but that aside, each case must be looked at in relation to its particular circumstances.
The maximum possible penalty in this case is $132,000. That is, $33,000 for each of the four contraventions.
The Court has dealt comprehensively with the circumstances of this case earlier in these Reasons for Judgment. It is agreed between the parties, and the Court also agrees, that it is a case deserving of a penalty at the lower end of the penalty spectrum. Within the lower end of the penalty spectrum it is also a case in respect of which regard must be had to a number of mitigating circumstances, including:
a)that the nature and extent of the conduct relating to only one employee, was not deliberate, and did not evince a genuine intention not to comply with minimum standards imposed by workplace laws;
b)that there is no evidence of the effect of any loss and damage in relation to the underpayments to Mr Colis, but there is evidence that the underpayments were remedied, and that an irrecoverable overpayment was in fact made to Mr Colis;
c)the need for general deterrence is quite low, and, moreover, Ultra Tune has, from the outset, co-operated with the FW Ombudsman, and that, together with the payments to Mr Colis, exhibit a reasonable level of contrition; and
d)that although there are four separate contraventions, there are really only two courses of conduct, one being the decision to pay the incorrect basic periodic rate of pay and overtime, and the other being the decision not to make payment in lieu of notice or severance payments on termination.
In the circumstances, the Court considers that an appropriate initial penalty assessment is 10% of the maximum penalty (or $3300) for each of the contraventions related to the basic periodic rate of pay and overtime. Having regard to the fact that both of these contraventions arise out of the same course of conduct, the Court considers that some further reduction in the overtime penalty is appropriate, and that will be reduced to 8% of the maximum penalty (or $2640). As to the payment in lieu of notice and severance pay contraventions a lesser penalty ought to be payable, particularly in circumstances where Ultra Tune organised immediate employment following its termination of Mr Colis, with the franchisee of the same store, and where there was some evidence of a transference of some ongoing leave credits. In those respects an appropriate initial penalty assessment of 5% of the maximum penalty (or $1650) is appropriate. Again, having regard to the fact that both of these contraventions arise out of the same course of conduct, the Court considers that some further reduction in the severance payment penalty is appropriate. Further, because the severance payment might have been reduced if an appropriate application had been made to the AIRC as at October 2007, a further small reduction in the severance penalty is appropriate. The severance payment penalty will therefore be 3% of the maximum penalty (or $990). The result is a total penalty of $8580 payable by Ultra Tune.
The Court has considered the penalty of $8580 in its totality. Having regard to all the circumstances, and the matters set out above related to the final setting of the penalties to be applied to each of the contraventions, the Court does not consider the penalty to be excessive.
The total penalty for Ultra Tune is therefore $8580. Having regard to the unchallenged evidence of Mr Chong concerning Ultra Tune’s short term cash flow difficulties, the Court will allow 3 months to pay, that is, until 31 October 2012.
Declarations and orders
For the reasons set out above the Court will make:
a)declarations as to the contraventions found; and
b)order that a penalty of $8580 be paid by Ultra Tune to the Commonwealth Consolidated Revenue Fund by 31 October 2012.
I certify that the preceding seventy-eight (78) paragraphs are a true copy of the reasons for judgment of Lucev FM
Date: 3 August 2012
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