Fair Work Ombudsman v Upper East Side Bondi
[2021] FedCFamC2G 354
•16 December 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Upper East Side Bondi [2021] FedCFamC2G 354
File number(s): SYG 479 of 2020 Judgment of: JUDGE OBRADOVIC Date of judgment: 16 December 2021 Catchwords: INDUSTRIAL LAW – Penalty hearing – contraventions of the Fair Work Act 2009 (Cth) – finding that imposition of penalty appropriate within the range submitted by the Applicant – penalties ordered. Legislation: Fair Work Act 2009 (Cth) ss 439, 546, 557,716 Cases cited: Australian Building and Construction Commission v Construction, Forestry, Mining and Energy Union [2018] HCA 3
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8
Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46
Fair Work Ombudsman v Absynthe Restaurant Pty Ltd [2015] FCCA 58
Fair Work Ombudsman v Daladontics (Vic) Pty Ltd [2014] FCCA 2571
Fair Work Ombudsman v Kentwood Industrial Pty Ltd (No.3) [2011] FCA 579
Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301
Fair Work Ombudsman v Offshore marine Services Pty Ltd [2021] FCA 498
Fair Work Ombudsman v Promoting U Pty Ltd & Anor [2012] FMCA 58
Fair Work Ombudsman v Rum Runner Trading Pty Ltd [2018] FCCA 1129
Fair Work Ombudsman v The Syndicate Group Pty Ltd [2015]] FCCA 2847
Fair Work Ombudsman v Upper East Side Bondi Pty Ltd & Anor [2021] FCCA 555
Fair Work Ombudsman v Viper Industries Pty Ltd [2015] FCCA 492
Kelly v Fitzpatrick [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7
Trade Practices Commission v CSR Ltd [1990] FCA 521Number of paragraphs: 38 Date of hearing: 2 August 2021 Place: Parramatta (via video link) Appearing for the Applicant: Ms Neal Solicitors for the Applicant: Office of the Fairwork Ombudsman Appearing for the First Respondent Ms Gelonese Appearing for the Second Respondent: In person ORDERS
SYG 479 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: UPPER EAST SIDE BONDI PTY LTD ACN 617 357 007
First Respondent
JULIA ROSE GELONESE
Second Respondent
ORDER MADE BY:
JUDGE OBRADOVIC
DATE OF ORDER:
16 DECEMBER 2021
THE COURT ORDERS THAT:
1.Pursuant to section 546(1) of the Fair Work Act 2009 (Cth) (“FW Act”):
(a)The First Respondent pay a pecuniary penalty of $22,050 for the two declared contraventions of section 716(5) of the FW Act by failing to comply with the Full-time Compliance Notice and the Casual Compliance Notice; and
(b)The Second Respondent pay a pecuniary penalty of $4,410 for her involvement within the meaning of section 550(2) of the FW Act in the First Respondent’s two declared contraventions of section 716(5) of the FW Act,
within 28 days of this order.
2.The Applicant has liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE OBRADOVIC:
These are reasons for judgment in respect of penalty to be imposed on the first and second respondent, pursuant to s.546 of Fair Work Act 2009 (Cth) (“FW Act”), for contravention of a civil remedy provision.
On 29 March 2021, the Court delivered its reasons for judgment in Fair Work Ombudsman v Upper East Side Bondi Pty Ltd & Anor [2021] FCCA 555 (“FWO v Bondi [2021]”):
a.The Court made declarations that the first respondent, Upper East Side Bondi Pty Ltd, contravened section 716(5) of the Fair Work Act 2009 (Cth) (“the Act”) by failing to comply with a compliance notice dated 15 October 2019 relating to full-time employees and to casual employees (respectively “Full-time Compliance Notice” and “Casual Compliance Notice”) and that the second respondent, Ms Gelonese, was involved, within the meaning of subsection 550(2) of the Act, in the first respondent’s contraventions of section 716(5) of the Act by failing to comply with the Full-time Compliance Notice and the Casual Compliance Notice (“Compliance Notices”).
b.The Court ordered the first respondent, within 28 days, to prepare a revised schedule for each of the employees (except two as identified) calculating their entitlements identified in the Compliance Notices, pay the identified underpayments and calculate and pay any superannuation owed with respect to those underpayments. The first respondent was also ordered to provide to the applicant (“FWO”) evidence of the gross and net payments once made.
The FWO submits to the Court that penalties in the range of 60% to 70% of the maximum for each of the respondents are in all of the circumstances appropriate. The respondents submit that penalties in this range would be “crushing and oppressive on the company” and the second respondent, since they are “now closed”.
Relative to the time of the contraventions, the maximum penalty the Court may impose pursuant to s.439(2) of the FW Act, for a contravention of s.716(5) of the FW Act is $31,500 for a company and $6,300 for an individual.
Principles Relevant to the Determination of Penalty
The primary purpose of a pecuniary penalty is to promote the public interest in compliance. It is “to put a price on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the Act” (Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 (“FW Building Industry Inspectorate”) at [55], citing Trade Practices Commission v CSR Ltd [1990] FCA 521). The “price” must be such that it is not regarded by the contravener as an “acceptable cost of doing business” (FW Building Industry Inspectorate at [55] and [59]).
The greater the impact of the penalty on the contravener, the more potent will be the example that the penalty sets for other potential contraveners. Likewise, it will be more likely that the contravener will seek to avoid the risk of subjection to further penalties and be deterred from further contravention (Australian Building and Construction Commission v Construction, Forestry, Mining and Energy Union [2018] HCA 3 at [116]).
Penalties should however be just and appropriate (Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 (“McAlary-Smith”) at [23]-[25]), and a penalty should not be oppressive or crushing (Kelly v Fitzpatrick [2007] FCA 1080 (“Kelly”) at [30]).
An appropriate method to determine the question of penalty may be summarised as follows:
a.identify the separate contraventions;
b.consider whether each separate contravention should be dealt with independently or whether separate contraventions constitute a single course of conduct within the meaning of s.557(1) FW Act;
c.consider whether the contraventions should be further grouped;
d.consider an appropriate penalty as to each contravention (i.e. each final individual group of contraventions, taken in isolation); and
e.review the aggregate penalty by application of the “totality principle”.
(Fair Work Ombudsman v Kentwood Industrial Pty Ltd (No.3) [2011] FCA 579 at [10]; Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301 (“NSH North”) at [36]).
Factors Relevant to Penalty
The relevant factors going to penalty have been identified as follows:
a.The nature and extent of the conduct which led to the breaches.
b.The circumstances in which that conduct took place.
c.The nature and extent of any loss or damage sustained as a result of the breaches.
d.Whether there had been similar previous conduct by the respondent.
e.Whether the breaches were properly distinct or arose out of the one course of conduct.
f.The size of the business enterprise involved.
g.Whether or not the breaches were deliberate.
h.Whether senior management was involved in the breaches.
i.Whether the party committing the breach had exhibited contrition.
j.Whether the party committing the breach had taken corrective action.
k.Whether the party committing the breach had cooperated with the enforcement authorities.
l.The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
m.The need for specific and general deterrence.
(Kelly at [14] adopting Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 at [26]-[59])
Consideration of the well-known penalty factors is to be undertaken within the overarching consideration of what penalty will achieve the principal object of deterrence, both specific and general. These factors are well-settled, but not a “rigid catalogue of matters for attention” (McAlary-Smith at [88] to [91]).
The identified factors while a convenient checklist, do not restrict the Court in the exercise of its discretion.
What is the appropriate penalty?
Nature and extent and circumstances of the conduct
The Court’s findings in respect of failure to comply with the Compliance Notices are set out in the liability judgment of FWO v Bondi [2021].
It was not until the FWO commenced proceedings, approximately five months after the due date for compliance, that the respondent took some action in purported compliance with the notices. Even as at the time of the liability hearing in October 2020 (11 months after the due date for compliance) the first respondent had still not complied with the notices, and was consequently ordered to do certain acts and things.
The failure to comply with the notices had occurred in the context of both respondents having knowledge that the first respondent’s employees were underpaid and months of communication between the Fair Work inspector and the second respondent, in an attempt to have the respondents rectify the underpayments and other identified failures of their obligations.
Nature and Extent of Loss or Damage
One of the principal objects of the FW Act is to provide a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions for all employees. A compliance notice is intended to act as a means of ensuring compliance with the FW Act without the need to go to Court (Fair Work Ombudsman v Rum Runner Trading Pty Ltd [2018] FCCA 1129 (“Rum Runner”) at [86] citing Fair Work Ombudsman v The Syndicate Group Pty Ltd [2015]] FCCA 2847 at [27]; Fair Work Ombudsman v Absynthe Restaurant Pty Ltd [2015] FCCA 58 at [36]). Where a person does not comply with a compliance notice, they undermine that purpose (Rum Runner at [110]) and can be seen as “undermin[ing] the FW Act’s enforcement framework, and the safety net of entitlements it is designed to protect” (Fair Work Ombudsman v Viper Industries Pty Ltd [2015] FCCA 492 at [78]. See also Fair Work Ombudsman v Daladontics (Vic) Pty Ltd [2014] FCCA 2571 at [23]).
Compliance Notices provide a mechanism for the efficient and cost effective rectification of identified contraventions of the FW Act, including the non-payment of entitlements to employees.
The first respondent’s failure to properly engage in the attempts to assist it in completing the action required in the Compliance Notices or to obtain assistance to do so, shows a clear disregard for the seriousness of the obligations under the Compliance Notices.
As noted in the liability judgement, without being provided with the detail as to entitlements and calculations as required by the Compliance Notices, the FWO is unable to determine whether the relevant employees have now received their full entitlements, including as to superannuation.
As a result of the failure to comply with the Compliance Notices, the various identified full-time and casual employees of the first respondent, may have suffered financial loss in that they did not receive their entitlements when they should have. While those amounts may objectively be relatively small, to the employees concerned they may not be insignificant. More so, the fact that the quantum may in some circumstances be relatively small, and the failure of the respondents to take the steps required in the time required, is considered an aggravating factor.
Involvement of Senior Management
The second respondent is the director of the first respondent, and its manager. At all material times, she was the person responsible for complying with the Compliance Notices and the person with whom the Fair Work inspector communicated with. It was the second respondent who advised that there had been compliance with the Compliance Notices when this had not in fact occurred.
Size and Financial Circumstances of the Company
The respondents submit that there has been a significant decrease in trade since the proceedings commenced and that the first respondent has already suffered “immeasurable” loss as a result of some bad press it had received arising from its failures to pay its employees.
The evidence is that the first respondent is still operating a restaurant despite what appears to be a submission to the contrary. The second respondent remains its director.
Contrition, Corrective Action and Co-Operation
Even after many months of engagement with the FWO, and through the Court process, the respondents have not expressed any meaningful contrition. In fact, the second respondent retains an air of incredulity in respect of the first respondent’s failures.
The first respondent has not complied with the Court’s orders of 29 March 2021. In these circumstances, the Court is still not in a position to be satisfied that the relevant employees have received their entitlements.
Course of Conduct and Grouping
The proceedings concern two contraventions of s.716(5) and as such they do not constitute a single course of conduct within the meaning of s.557 FW Act. However, it is open to the Court to impose a single penalty for multiple contraventions if they have “common elements” (Fair Work Ombudsman v Offshore marine Services Pty Ltd [2021] FCA 498 at [7], [23]-[26]).
The Compliance Notices were provided to the first respondent on the same date, and while they were each issued in respect of different groups of employees, namely those who were employed on a full-time basis and those who were employed on a casual basis, the notices required similar steps to be taken.
The failures to comply with the Compliance Notices were contraventions that arose out of a single course of conduct with the same factual circumstances, and it is therefore appropriate that a single penalty be imposed in respect of the two contraventions of s.716(5).
Deterrence
The first respondent continues to operate its restaurant business and employ staff.
The second respondent continues to hold her position as director and general manager of the restaurant business, and continues to have responsibility for overseeing employee’s entitlements.
Specific deterrence is therefore relevant.
General deterrence is also an important factor for the Court’s consideration. It is vital for the purposes of the FW Act that the public is left in no doubt as to there being positive obligations to comply with statutory notices issued by FWO, such as compliance notices.
Penalty Imposed
Whilst the penalty imposed must not be crushing or oppressive, it must be proportionate to the conduct engaged in by the respondents and not have the effect of exonerating the conduct (Kelly at [30]; McAlary-Smith at [23] per Gray J, at [66]-[73] per Graham J, at [98]-[102] per Buchanan J; Fair Work Ombudsman v Promoting U Pty Ltd & Anor [2012] FMCA 58 at [55]-[57].)
There is no evidence as to the specific financial position of either respondent, and as such, it is difficult to accept the respondents’ submissions that the penalty sought by FWO would be crushing or oppressive.
The Court finds that the conduct of the respondents is highly aggravating, and that the penalties imposed should be in the higher range whilst applying a single penalty for the two contraventions.
In respect of the contraventions of s.716(5) it is appropriate that a single penalty of $22,050 be imposed on the first respondent.
In respect of the second respondent’s involvement within the meaning of s.550(2) FW Act of the first respondent’s contraventions, it is appropriate that a single penalty of $4,410 be imposed on the second respondent.
In all of the circumstances, given the respondents’ conduct, the penalty while significant so as to bear relativity to the seriousness of the conduct is not oppressive or crushing.
For all of those reasons, orders as set out at the forefront of these Reasons for Judgement will be made.
39 I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Obradovic.
Associate:
Dated: 16 December 2021
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