Fair Work Ombudsman v Viota
[2021] FedCFamC2G 119
•7 October 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Viota [2021] FedCFamC2G 119
File number(s): MLG 3377 of 2020 Judgment of: JUDGE RILEY Date of judgment: 7 October 2021 Catchwords: INDUSTRIAL LAW – failure to comply with compliance notice – declaration and penalties – hair dressing salon Legislation: Fair Work Act 2009, ss 539(2), 545(1), 546(1), 546(3)(a), 547(2) and 716(5) Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (CFMEU) (2018) 262 CLR 157; (2018) 351 ALR 190; (2018) 92 ALJR 219; (2018) 273 IR 211; [2018] HCA 3
Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd (2006) 236 ALR 665; (2008) ASAL 55-176; (2007) ATPR 42-138; [2006] FCA 1427
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; (2008) 246 ALR 35; [2008] FCAFC 8
Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; (2015) 326 ALR 476; (2015) 90 ALJR 113; (2015) 255 IR 87; (2015) 326 ALR 476; [2015] HCA 46
Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228; [2001] FCA 1364
Fair Work Ombudsman v Bedington [2012] FMCA 1133
Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301
Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455; [2008] FCAFC 70
Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357; (2008) 177 IR 243; [2008] FCAFC 170
Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; (2007) 162 IR 444; [2007] FCAFC 65
Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412
Division Division 2 General Federal Law Number of paragraphs: 70 Date of hearing: 24 August 2021 Place: Melbourne Advocate for the applicant Nicholas Simeon Solicitors for the applicant Office of the Fair Work Ombudsman Advocate for the respondent In person Solicitors for the respondent None ORDERS
MLG 3377 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
ApplicantAND: JORGE GUILLERMO VIOTA
Respondent
ORDER MADE BY:
JUDGE RILEY
DATE OF ORDER:
7 OCTOBER 2021
UPON THE ADMISSIONS MADE BY THE RESPONDENT, THE COURT DECLARES THAT:
1.The respondent contravened s.716(5) of the Fair Work Act 2009 (“the Act”) by failing, without reasonable excuse, to comply with a compliance notice issued on 11 March 2020.
THE COURT ORDERS BY CONSENT THAT:
2.Within 28 days, pursuant to s.545(1) of the Act, the respondent pay:
(a)to the nominated bank account of Samantha Dove, the amount of $19,669.45, which the respondent was required to pay pursuant to the compliance notice, less the required amount of taxation;
(b)to the Commissioner of Taxation, the required amount of taxation.
3.Within 28 days, pursuant to s.545(1) of the Act, the respondent make a superannuation contribution of $1,868.60 on behalf of Ms Dove to her nominated superannuation fund.
4.Pursuant to s.546(1) of the Act, the respondent pay a pecuniary penalty to the Commonwealth for the contravention.
5.Pursuant to s.546(3)(a) of the Act, the pecuniary penalty be paid within 28 days to the Consolidated Revenue Fund of the Commonwealth.
THE COURT ORDERS THAT:
6.Within 28 days, the respondent pay a pecuniary penalty of $4,000 to the Consolidated Revenue Fund of the Commonwealth.
7.Within 28 days, pursuant to s.547(2) of the Act, the respondent pay pre-judgment interest of $1,228.15 to Ms Dove’s nominated bank account on the amount of $19,669.45 from 17 April 2020 until 6 October 2021 inclusive.
THE COURT ORDERS BY CONSENT THAT:
8.The applicant have 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:This copy of the court’s reasons for judgment may be subject to review 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 RILEY
INTRODUCTION
This matter concerns a declaration in respect of a contravention of the Fair Work Act 2009 (“the Act”) and the penalties to be imposed for that contravention. The contravention consisted of the respondent’s failure to comply with a compliance notice dated 11 March 2020 issued to him on 11 March 2020, pursuant to section s.716(2) of the Act (“the compliance notice”).
The applicant is a statutory appointee, who is able to issue compliance notices pursuant to the Act.
The respondent is a sole trader who conducts a hair dressing salon. His underlying breach was failing to pay a staff member a casual loading, and failing to pay her at the correct rates for Saturdays and public holidays. During the hearing, the parties agreed that the amount of the underpayment was $19,669.45.
The parties filed a statement of agreed facts. In essence, the respondent admitted that he had contravened s.716(5) of the Act by failing, without reasonable excuse, to comply with the compliance notice. The parties jointly proposed that the court make a declaration as to the contravention, make certain orders and impose a penalty. The parties were in dispute as to the amount of the penalty.
THE COMPLIANCE NOTICE
The compliance notice required the respondent:
(a)by 9 April 2020, to remedy the direct effects of the contraventions by taking the following action in respect of the Employee (Specified Action):
(i)identify the number of hours worked by the Employee during the Period in respect of each of the entitlements that were required to be paid;
(ii)identify the amount paid to the Employee during the Period in respect of each the entitlements (having regard to the hours worked by the Employee);
(iii)calculate the amount that should have been paid to the Employee during the Period in respect of each of the entitlements;
(iv)make a payment to the Employee of the difference between the amount referred to in paragraphs 13(a)(ii) and 13(a)(iii) above (Underpayment);
(v)make a record of the information and amounts referred to in paragraphs 13(a)(i) to 13(a)(iii) above and the amount of the payment referred to in 13(a)(iv) above (Underpayment Rectification Information);
(vi)calculate and pay any additional superannuation contributions required to be paid as a result of the Underpayment pursuant to clause 24.2 of the Award; and
(vii)prepare a schedule (Schedule) of the Underpayment Rectification Information and additional superannuation contributions in respect of the Employee, and evidence of the amounts paid to the Employee;
(b)by 16 April 2020, to produce to the Applicant reasonable evidence of its compliance with the Compliance Notice, by producing a copy of the Schedule and evidence of all payments made to the Employee and the relevant superannuation fund.
THE PROPOSED DECLARATION
The statement of agreed facts proposed that the following declaration be made by the court:
… the Respondent contravened section 716(5) of the Act by failing without reasonable excuse to comply with the compliance notice.
There has been authority in the past to the effect that it is not appropriate for a court to make declarations based on admissions. However, there is more recent authority that in certain cases it is appropriate for the court to make declarations in such circumstances.
In particular, in Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd (2006) 236 ALR 665; (2008) ASAL 55-176; (2007) ATPR 42-138; [2006] FCA 1427, Kiefel J, as her Honour then was, considered at paragraphs 52 to 59 the rationale for the previous approach taken by the courts. Her Honour came to the view that the previous approach may no longer be warranted, particularly in public interest cases such as this, and particularly if the declarations are preceded by a statement that they are made upon admissions.
In all the circumstances of this case, I am satisfied that it is appropriate to make the declaration sought by the parties on the basis of the admissions made by the respondent, provided that the declaration is preceded by an appropriate preamble. The declaration will be made accordingly.
THE PROPOSED ORDERS
In the statement of agreed facts at paragraph 18, the parties jointly sought orders as follows:
(a)pursuant to section 545(1) of the Act, the respondent pay the amount that was required to be paid pursuant to the compliance notice, minus taxation as required by law, to the employee’s nominated bank account within 28 days;
(b)pursuant to section 545(1) of the Act, the respondent make superannuation contributions on behalf of the employee into her nominated superannuation fund in respect of the ordinary time earnings component of the payment made pursuant to order 18(a) above at the superannuation guarantee charge rate prescribed by the applicable superannuation legislation;
(c)pursuant to section 547(2) of the Act, that the respondent pay interest to the employee’s nominated bank account on the amount referred to in paragraph 18(a) above;
(d)pursuant to section 546(1) of the Act that the respondent pay a pecuniary penalty to the Commonwealth, for the contravention set out in paragraph 17 above;
(e)pursuant to section 546(3)(a) of the Act, that all pecuniary penalties imposed on the respondent be paid within 28 days to the Consolidated Revenue Fund of the Commonwealth;
(f)the parties have liberty to apply; and
(g)such further orders as the court considers appropriate.
During the hearing, the parties agreed that:
(a)the gross amount of wages that the respondent had underpaid Ms Dove was $19,669.45; and
(b)the amount of superannuation that the respondent had underpaid on Ms Dove’s behalf was $1,868.60.
The parties also agreed that the respondent owed Ms Dove interest from the day after the compliance notice fell due, being 17 April 2020, until judgment. The applicant calculated that at a flat rate until the day of the hearing, being 24 August 2021. The applicant arrived at a figure of $806.45. The respondent did not dispute that figure.
However, the Federal Court interest rates for pre-judgment interest were not a flat rate for the relevant period. They were:
(a)4.75%pa for the period 1 January 2020 to 30 June 2020;
(b)4.25%pa for the period 1 July 2020 to 31 December 2020;
(c)4.1%pa for the period 1 January 2021 to 31 December 2021.
From 17 April 2020 until 30 June 2020 (inclusive) is 75 days. 2020 was a leap year. 75/366 X $19,669.45 X 4.75% = $191.45.
From 1 July 2020 until 31 December 2020 (inclusive) is 184 days. 184/366 X $19,669.45 X 4.25% = $420.26.
From 1 January 2021 until 6 October 2021 (inclusive) is 279 days. 279/365 X $19,669.45 X 4.1% = $616.44.
That totals $1,228.15. I will use that as the figure for interest.
Otherwise, and subject to the determination of penalty, I consider that it is appropriate to make the orders sought by the parties.
The only issue remaining for the court’s determination is the amount of the penalty.
MATERIAL RELIED UPON
At the hearing on 24 August 2021, the applicant relied on:
(a)the statement of agreed facts filed on 18 March 2021;
(b)the affidavit affirmed by Nicholas Evangelos Simeon on 4 February 2021;
(c)the affidavit sworn by Claudia Andrea Zeballos on 6 May 2021;
(d)the affidavit affirmed by Samantha Douglas Dove on 29 April 2021;
(e)the applicant’s written submissions filed on 6 May 2021; and
(f)the court book filed on 19 August 2021.
The respondent was not represented. He did not file a defence or written submissions. However, he filed an affidavit that was sworn or affirmed on 18 May 2021 and made brief oral submissions at the hearing.
LEGISLATION
Subsection 716(5) of the Act provides that:
A person must not fail to comply with a notice given under this section.
Subsection 547(2) of the Act provides that:
In making the order the court must, on application, include an amount of interest in the sum ordered, unless good cause is shown to the contrary.
Subsection 545(1) of the Act provides that:
The Federal Court or the Federal Circuit and Family Court of Australia (Division 2) may make any order the court considers appropriate if the court is satisfied that a person has contravened, or proposes to contravene, a civil remedy provision.
Section 546 of the Act provides that:
(1)The Federal Court, the Federal Circuit and Family Court of Australia (Division 2) or an eligible State or Territory court may, on application, order a person to pay a pecuniary penalty that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision.
…
(3)The court may order that the pecuniary penalty, or a part of the penalty, be paid to:
(a) the Commonwealth;
…
Subsection 539(2) of the Act, and item 33 in the table in that provision, provides that:
For each civil remedy provision, the persons referred to in column 2 of the item may, subject to sections 540 and 544 and Subdivision B, apply to the courts referred to in column 3 of the item for orders in relation to a contravention or proposed contravention of the provision, including the maximum penalty referred to in column 4 of the item.
Item Column 1
Civil remedy provisionColumn 2
PersonsColumn 3
CourtsColumn 4
Maximum penalty33 716(5) an inspector (a) …;
(b) the Federal Circuit and Family Court of Australia (Division 2);
(c) …
30 penalty units
AGREED FACTS
The parties set out the agreed facts at paragraphs 2 to 16 of their statement of agreed facts filed on 18 March 2021 as follows:
A. THE APPLICATION
2.On 16 September 2020, the Applicant filed an Application and Statement of Claim in this Court against the Respondent in respect of the Respondent's contravention of section 716(5) of the Fair Work Act 2009 (Cth) (FW Act).
B.ADMITTED CONTRAVENTION
3.On the basis of the facts set out below, the Respondent admits to contravening the following civil remedy provision of the FW Act: section 716(5) of the FW Act by failing without reasonable excuse to comply with a Compliance Notice issued by Fair Work Inspector Claudia Zeballos (FWI Zeballos) as a result of FWI Zeballos forming a reasonable belief that the Respondent contravened terms of the Hair and Beauty Industry Award 2010 (the Award).
C.THE PARTIES
The Applicant
4.The Applicant, the Fair Work Ombudsman, is and was at all material times:
(a)a statutory appointee of the Commonwealth appointed by the Governor-General by written instrument pursuant to section 687(1) of the FW Act;
(b)a Fair Work Inspector (FWI) pursuant to section 701 of the FW Act; and
(c)a person with standing to bring these proceedings and to apply for orders for contraventions of civil remedy provisions pursuant to section 539(2) of the FW Act.
5.FWI Zeballos is and was at all material times a FWI who· was appointed by the Applicant under section 700(1)(a) of the FW Act.
The Respondent - Jorge Guillermo Viota
6.The Respondent, Jorge Guillermo Viota, is and was at all material times:
(a)a sole trader carrying on a hairdressing business, providing hairdressing services in the State of Victoria at 455 Lygon Street, Brunswick East, Victoria 3057;
(b)the holder of the Australian Business Number 50 34 7 199 335; and
(c)a ‘national system employer’ within the extended meaning of section 30N of the FW Act.
7.In or around October 2020, the Respondent relocated his hairdressing business to Level 2, 5/41 Lygon Street, Brunswick East, Victoria 3057.
D.CONTRAVENTION OF SECTION 716(5) OF THE FW ACT
The Investigation
8.From in or around January 2020 to May 2020, FWI Zeballos undertook an investigation into the Respondent's compliance with Commonwealth workplace laws (Investigation).
9.The Investigation commenced following a request for assistance made to the Applicant from a former employee of the Respondent, Ms Samantha Dove (Employee).
10.As a result of the Investigation, FWI Zeballos formed a reasonable belief, within the meaning of section 716(1) of the FW Act, that, at all material times during the period from 16 December 2015 to 27 December 2017 (Period):
(a) the Respondent employed the Employee;
(b)the Employee performed work as a hairdressing assistant for the Respondent on a casual basis;
(c)the Award covered and applied to the Respondent in respect of the Employee;
(d)the Employee was classified as an Adult, Level 1 Employee under the Award;
(e)the Employee ceased to be employed by the Respondent on 27 December 2017; and
(f)the Respondent had not paid the Employee's entitlements under the Award in full, namely:
(i)Clause 13.2 - casual loading of 25% of the ordinary hourly rate for all hours worked between 7:00am and 9:00pm, Monday to Friday;
(ii)Clause 31.2(c) - loading of 33% for ordinary hours within the span of hours on a Saturday; and
(iii)Clause 35.3 - a rate of double time and a half for work on a Public Holiday
(Contraventions).
Compliance Notice
11.On 11 March 2020, FWi Zeballos gave the Respondent a notice pursuant to section 716(2) of the FW Act (Compliance Notice) by handing it to the Respondent in person during a site visit at 455 Lygon Street, Brunswick East, Victoria 3057.
12.FWI Zeballos discussed the content, requirements and timeframes of the Compliance Notice with the Respondent during the site visit referred to at paragraph 11 above.
13.Pursuant to section 716(2) of the FW Act, the Compliance Notice required the Respondent:
(a)by 9 April 2020, to remedy the direct effects of the Contraventions taking the following action in respect of the Employee (Specified Action):
(i)identify the number of hours worked by the Employee during the Period in respect of each of the entitlements that were required to be paid;
(ii)identify the amount paid to the Employee during the Period in respect of each the entitlements (having regard to the hours worked by the Employee);
(iii)calculate the amount that should have been paid to the Employee during the Period in respect of each of the entitlements;
(iv)make a payment to the Employee of the difference between the amount referred to in paragraphs 13(a)(ii) and 13(a)(iii) above (Underpayment);
(v)make a record of the information and amounts referred to in paragraphs 13(a)(i) to 13(a)(iii) above and the amount of the payment referred to in 13(a)(iv) above (Underpayment Rectification Information);
(vi)calculate and pay any additional superannuation contributions required to be paid as a result of the Underpayment pursuant to clause 24.2 of the Award; and
(vii)prepare a schedule (Schedule) of the Underpayment Rectification Information and additional superannuation contributions in respect of the Employee, and evidence of the amounts paid to the Employee;
(b)by 16 April 2020, to produce to the Applicant reasonable evidence of its compliance with the Compliance Notice, by producing a copy of the Schedule and evidence of all payments made to the Employee and the relevant superannuation fund.
14. The Compliance Notice met the requirements of section 716(3) of the FW Act
Failure to comply with the Compliance Notice
15. The Respondent did not
(a) take the Specified Action by 9 April 2020, or at all; and
(b)produce to the Applicant any evidence of compliance with the Compliance Notice by 16 April 2020, or at all.
16.The Respondent admits that, by reason of the matters agreed to in paragraph 15 above, that he failed without reasonable excuse to comply with the Compliance Notice and thereby contravened section 716(5) of the FW Act
APPROACH TO DETERMINING PENALTY
Bromwich J summarised the proper approach to determining penalty in cases such as this in Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301 at [36] as follows:
(1)Identify the separate contraventions, with each breach of each obligation being a separate contravention, and each breach of a term of the Award being a separate contravention.
(2)Consider whether each separate contravention should be dealt with independently or with some degree of aggregation for those contraventions arising out of a course of conduct, noting that s 557 of the FW Act provides that two or more contraventions of a given civil remedy provision are to be taken to be a single contravention if committed by the same person and arising out of a course of conduct by that person.
(3)Consider whether there should be further adjustment to ensure that, to the extent of any overlap between groups of separate aggregated contraventions, there is no double penalty imposed, and that the penalty is an appropriate response to what each respondent did.
(4)Consider the appropriate penalty in respect of each final individual group of contraventions, taken in isolation.
(5)Consider the overall penalties arrived at, including by reference to those which may be proposed by the FWO (as permitted by Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 (CFMEU Civil Penalties Case) at [64]) and what is proposed by the respondents, and apply the totality principle, to ensure that the penalties for each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary: see Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [23]. [71] and [102].
A convenient checklist of the factors that the court might consider in determining penalty include the matters that were identified by Mowbray FM in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 at [26]-[59] and adopted by Tracey J in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [14]. That list is 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.
(m) The need for specific and general deterrence.
The court must, of course, be mindful of the caution expressed by Buchanan J in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; (2008) 246 ALR 35; [2008] FCAFC 8 at [91] as follows:
Check lists of this kind can be useful providing they do not become transformed into a rigid catalogue of matters for attention. At the end of the day the task of the Court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations. There is no suggestion in the present case that the learned magistrate made any relevant error in her identification of the matters which she should consider in fixing penalties.
The court will consider the circumstances of the case under the various headings suggested by Mowbray FM, and then consider whether any other matters are relevant.
Step 1: identifying the breaches
As stated above, the respondent contravened s.716(5) of the Act by failing without reasonable excuse to comply with the compliance notice issued on 11 March 2020.
Step 2: single course of conduct
As there was only one breach, the single course of conduct principles do not need to be considered.
Step 3: grouped breaches
As there was only one breach, the grouped breaches principles do not need to be considered.
Step 4: the appropriate penalty for the breaches
a. the nature and extent of the conduct which led to the breach
The nature of the conduct which led to the breach was the respondent’s failure to comply with a compliance notice, notwithstanding that his obligations were clearly spelt out for him.
b. the circumstances in which that conduct took place
The breach occurred in circumstances of the applicant investigating the suspected underpayment of Ms Dove, and putting the respondent on notice about that.
Ms Dove was a vulnerable employee, being aged between 18 and 21 years when she was employed by the respondent. He paid her a flat rate of between $12 and $13 per hour, when she should have been paid more than $20 per hour. The respondent submitted that he had only been trying to help Ms Dove out. However, while he may have had good intentions, the respondent was still obliged to comply with the industrial laws, and pay Ms Dove her full lawful entitlements.
The breach occurred on 11 March 2020, and continued after that. The COVID-19 pandemic was beginning at around that time, and caused shutdowns of many businesses in Victoria for a prolonged period of time. However, JobKeeper was also available to some people. It is unknown what impact the pandemic had on the respondent, as he chose to not to provide any evidence about his financial circumstances. The respondent made some submissions about the impact of the pandemic upon him, but, because they were not supported by evidence, I am not able to take them into account.
c. the nature and extent of any loss or damage sustained
The respondent’s failure to comply with the compliance notice has obliged the applicant to bring these proceedings, and expend time and money in doing so.
The underlying breach concerned one employee, and caused her a loss of nearly $22,000 in underpaid wages and unpaid superannuation.
d. whether there had been similar previous conduct
It was not suggested that the respondent has engaged in any similar conduct previously.
e. whether the breaches arose out of the one course of conduct
There was a single breach, so the course of conduct principles do not apply.
f. the size of the business enterprise involved
Tracey J said in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [28]:
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” (citation omitted).
Similarly, in Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412, the court said at [27]:
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. …
There respondent conducts a small business. However, as courts have said many times, that does not excuse non-compliance with the Act and industrial obligations generally.
g. whether or not the breaches were deliberate
While there may be debate about whether the underlying underpayment of Ms Dove was deliberate, there can be no doubt that the respondent was on notice about his obligations pursuant to the compliance notice, and his non-compliance with it was deliberate.
h. whether senior management was involved in the breach
The respondent was the senior manager of the business in the sense that he was a sole trader and entirely in control of the business.
i. contrition, corrective action and co-operation with the authorities
The respondent did not dispute his liability. He entered into an agreed statement of facts, but only after the applicant filed an application for default judgment on 5 February 2021. However, the respondent did not concede the amounts outstanding to Ms Dove for underpaid wages and unpaid superannuation until after the hearing began. As at the date of hearing, being 24 August 2021, the respondent had not paid Ms Dove the outstanding amounts, although the applicant had served the compliance notice on 11 March 2020. The applicant offered the respondent an opportunity to enter into a payment plan in April 2020, but he declined.
The respondent apologised in his affidavit and during the hearing for his underpayment of Ms Dove. However, there was no evidence that he has apologised directly to her.
j. the need to ensure compliance with minimum standards
The respondent in this case breached Ms Dove’s minimum entitlements.
k. the need for specific and general deterrence
In Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; (2015) 326 ALR 476; (2015) 90 ALJR 113; (2015) 255 IR 87; (2015) 326 ALR 476; [2015] HCA 46, French CJ, Kiefel, Bell, Nettle and Gordon JJ said at [55]:
No less importantly, whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, is primarily if not wholly protective in promoting the public interest in compliance:
“Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act]. ... The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.”
(footnotes omitted)
Similarly, in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (CFMEU) (2018) 262 CLR 157; (2018) 351 ALR 190; (2018) 92 ALJR 219; (2018) 273 IR 211; [2018] HCA 3, Keane, Nettle and Gordon JJ said at [116]:
As has been observed, the principal object of an order that a person pay a pecuniary penalty under s 546 is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners. According to orthodox sentencing conceptions as they apply to the imposition of civil pecuniary penalties, specific deterrence inheres in the sting or burden which the penalty imposes on the contravener. Other things being equal, it is assumed that the greater the sting or burden of the penalty, the more likely it will be that the contravener will seek to avoid the risk of subjection to further penalties and thus the more likely it will be that the contravener is deterred from further contraventions; likewise, the more potent will be the example that the penalty sets for other would-be contraveners and therefore the greater the penalty's general deterrent effect. Conversely, the less the sting or burden that a penalty imposes on a contravener, the less likely it will be that the contravener is deterred from further contraventions and the less the general deterrent effect of the penalty. Ultimately, if a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so it will be unlikely, or at least less likely, to achieve the specific and general deterrent effects that are the raison d'être of its imposition.
(footnotes omitted)
In relation to specific deterrence, Gray J observed in Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357; (2008) 177 IR 243; [2008] FCAFC 170 at [37] that:
… Specific deterrence focuses on the party on whom the penalty is to be imposed and the likelihood of that party being involved in a similar breach in the future. Much will depend on the attitude expressed by that party as to things like remorse and steps taken to ensure that no future breach will occur. …
In relation to general deterrence, Lander J noted in Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; (2007) 162 IR 444; [2007] FCAFC 65 at [93]:
… In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty…(citations omitted)
Similarly, in Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228 at 230-231; [2001] FCA 1364, Finkelstein J said:
… 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 ….
In relation to general deterrence, the applicant submitted that:
19.General deterrence must serve a purpose such that the penalty is not seen by others as just ‘the cost of doing business’.14 In order to be useful as a general deterrent, a penalty ‘should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations’.15
20.The efficacy of statutory notices such as compliance notices will be hindered if recipients perceive that a failure to comply carries no meaningful consequences. Given the importance of the power to issue a compliance notice as an enforcement tool available to Fair Work Inspectors, and that compliance with such notices avoids the need for litigation or the imposition of any penalties,16 penalties for non-compliance should be set at a level which demonstrates there are serious consequences for failing to comply with a compliance notice. In doing so, the Court will deter other parties from failing to comply with compliance notices.
FN 14:Fair Work Ombudsman v Yogurberry World Square (Yogurberry) [2016] FCA 1290, [27].
FN 15:Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; [2007] FCAFC 65, [93] (Lander J).
FN 16:Fair Work Ombudsman v Syndicate Group Pty Ltd [2015] FCCA 2847, [27]; cited in Fair Work Ombudsman v Blu Hornsby Pty Ltd [2016] FCCA 1150, [29].
In relation to specific deterrence, the applicant submitted that:
21.Specific deterrence is directed at ensuring that a contravener is not prepared to embark upon the risk of engaging in the same contravening conduct in the future.17
22.There is a particular need to specifically deter the Respondent from engaging in the same contravening conduct in future, given that the Respondent is still operating the Business as a sole trader and is actively seeking employees to work in his Business.18
23.A penalty should accordingly be fixed at a level which specifically deters the Respondent from engaging in further contravening conduct in the future in relation to his current and prospective employees.
FN 17:Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128, [50].
FN 18:FWI Zeballos Affidavit, CAZ–15.
Other issues
In Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455; [2008] FCAFC 70, Stone and Buchanan JJ held at [75]:
A conventional consideration in assessing a discount in a criminal case for a plea of guilty is the stage in the proceedings at which the plea is entered. Normally, the maximum discount for this factor, sometimes thought to be 25%, is reserved for a plea made at the first reasonable opportunity …
In Fair Work Ombudsman v Bedington [2012] FMCA 1133 Jarrett FM held at [87]:
The cases indicate that a discount on the penalty to be imposed is appropriate where there has been co-operation and admissions early in the course of an investigation or soon after the commencement of proceedings. Such discounts range as high as 30% in some cases. …
The applicant submitted, and the respondent did not dispute, that a discount of 10% for admissions was appropriate in this case. I consider that discount to be appropriate, because the respondent eventually did not contest liability, but he did not make his position known until after the applicant had filed an application for a default judgment, and he did not agree on the figure owing to Ms Dove until the hearing began.
Step 4: the appropriate penalty
Pursuant to s.539(2) of the Act, the maximum penalty for an individual for a breach of s.716(5) of the Act is $6,300.
The applicant sought a penalty of 65% to 75% of the maximum, less a discount of 10% for cooperation, resulting in a proposed penalty of $3,685.50 to $4,252.50. The applicant submitted that that range was appropriate on the basis that:
(a)there is a need for general deterrence against non-compliance with compliance notices;
(b)there is a need for specific deterrence given the Business is still being operated by the Respondent and continues to employ staff;
(c)the failure to comply with a statutory notice is serious and required the Applicant to commence proceedings in circumstances where litigation could have been avoided;
(d)the substantial loss to the Employee as a result of the Contravention;
(e)there is a need to protect young and vulnerable workers; and
(f)senior management was involved in the Contravention.
The respondent did not propose any particular amount, or proportion of the maximum, as a penalty.
In my view, the respondent needs to be given a substantial penalty for his contravening conduct. Non-compliance with a compliance notice is a serious issue. The respondent has expressed some contrition in words, but has not rectified the underpayments.
The respondent cooperated with the applicant in agreeing to a statement of agreed facts, but put the applicant to a good deal of trouble by not complying with the compliance notice in the first place, and not cooperating until the applicant filed an application for default judgment on 5 February 2021.
Both general and specific deterrence are necessary in this case, as the respondent continues to trade and employ people.
The respondent’s underlying victim was a vulnerable worker, only 18 to 21 years old during the period when the respondent employed her.
In my view, a penalty of $4,000 is appropriate in this case.
Step 5: the totality principle
As there was only one breach, the totality principle does not apply.
There will be orders accordingly.
I certify that the preceding seventy (70) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Riley. Associate:
Dated: 7 October 2021
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