Fair Work Ombudsman v Viplus Pty Ltd and ANOR and Fair Work Ombudsman v Vipper Pty Ltd and ANOR
[2017] FCCA 1669
•20 July 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v VIPLUS PTY LTD & ANOR and FAIR WORK OMBUDSMAN v VIPPER PTY LTD & ANOR | [2017] FCCA 1669 |
| Catchwords: INDUSTRIAL LAW – Application for imposition of pecuniary penalty orders – underpayment of employee entitlements – making false records – using false records. |
| Legislation: Fair Work Act 2009, ss.550, 551(1) |
| Australian Building and Construction Commissioner v Parker [2017] FCA 564 Carpenter v Corona Manufacturing Pty Ltd (2002) 122 IR 387 Fair Work Ombudsman v Al Hilfi [2012] FCA 1166 Fair Work Ombudsman v Complete Windscreens (SA) Pty Ltd [2016] FCA 621 Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365 Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034; 152 ALD 209 Fair Work Ombudsman v South Jin Pty Ltd [2015] FCA 1456 McMenemy v Thomas Duryea Consulting (2012) 223 IR 125 Potter v Fair Work Ombudsman [2014] FCA 187 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | VIPLUS PTY LTD |
| Second Respondent: | JASON YUAN |
| File Number: | BRG 1114 of 2015 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | VIPPER PTY LTD |
| Second Respondent: | JASON YUAN |
| File Number: | BRG 1115 of 2015 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 4 October 2016 |
| Date of Last Submission: | 4 October 2016 |
| Delivered at: | Brisbane |
| Delivered on: | 20 July 2017 |
REPRESENTATION
| Counsel for the Applicant in proceedings BRG1114/2015 and proceedings BRG1115/2015: | Ms Gall |
| Solicitors for the Applicant in proceedings BRG1114/2015 and proceedings BRG1115/2015: | Office of the Fair Work Ombudsman |
| No appearance by the First Respondent in proceedings BRG1114/2015 and proceedings BRG1115/2015 |
| The Second Respondent appeared on his own behalf in proceedings BRG1114/2015 and proceedings BRG1115/2015 |
ORDERS
IN PROCEEDINGS BRG 1114 of 2015:
THE COURT DECLARES THAT:
For the period 9 September, 2013 to 14 September, 2014:
(a)Yi Chi Shih was classified as a Retail Employee Level 3 in accordance with Schedule B.3 of the General Retail Industry Award 2010; and
(b)Karthick Elangovan was classified as:
(i)a Retail Employee Level 1 in accordance with Schedule B.3 of the General Retail Industry Award 2010 from 9 September, 2013 to 29 June, 2014; and
(ii)a Retail Employee Level 3 in accordance with Schedule B.3 of the General Retail Industry Award 2010 from 30 June, 2014 to 14 September, 2014.
Viplus Pty Ltd:
(a)contravened s.45 of the Fair Work Act 2009 (Cth) by virtue of a contravention of cl.17 of the General Retail Industry Award 2010 by failing to pay the minimum rates of pay to four of its employees;
(b)s.45 of the Fair Work Act 2009 (Cth), by virtue of a contravention of clause 13.2 and clause A.5.4 of the General Retail Industry Award 2010 by failing to pay the applicable casual loading to its employees;
(c)s.45 of the Fair Work Act 2009 (Cth), by virtue of a contravention of clause 29.2 of the General Retail Industry Award 2010 by failing to pay one employee the applicable overtime rates;
(d)s.45 of the Fair Work Act 2009 (Cth), by virtue of a contravention of clause 29.4(a) of the General Retail Industry Award 2010 by failing to pay two employees the applicable evening penalty loading;
(e)s.45 of the Fair Work Act 2009 (Cth), by virtue of a contravention of clause 29.4(b) of the General Retail Industry Award 2010 by failing to pay the applicable full-time Saturday loading to one employee;
(f)s.45 of the Fair Work Act 2009 (Cth), by virtue of a contravention of clauses 29.4(b) and A.7.3 of the General Retail Industry Award 2010 by failing to pay the applicable casual Saturday loading to its employees;
(g)s.45 of the Fair Work Act 2009 (Cth) by virtue of contraventions of clause 29.4(d) of the General Retail Industry Award 2010 by failing to pay the Full-time Public Holiday Loading to two employees;
(h)s.45 of the Fair Work Act 2009 (Cth) by virtue of contraventions of clauses 29.4(d), A.6.4 and A.7.3 of the General Retail Industry Award 2010 by failing to pay Casual Public Holiday Loading to its employees;
(i)s.45 of the Fair Work Act 2009 (Cth) by virtue of contraventions of clauses 30.3(a) and clause A.7.3 of the General Retail Industry Award 2010 by failing to pay Weekday Shiftwork Rates to its employees;
(j)s.45 of the Fair Work Act 2009 (Cth) by virtue of contraventions of clauses 30.3(b) and A.7.3 of the General Retail Industry Award 2010 by failing to pay Saturday Shiftwork Rates to its employees;
(k)s.536(2) of the Fair Work Act 2009 (Cth), by providing pay slips to its employees that did not accurately state the gross and net amounts paid to the employees or amounts paid to the employees in respect of a loading or penalty; and
(l)s.535(1) of the Fair Work Act 2009 (Cth) by failing to make records which complied with the requirements of regulation 3.33(3) of the Fair Work Regulations2009 (Cth).
Jason Yuan was involved in each of the contraventions committed by Viplus Pty Ltd as identified in declaration (2) hereof.
As a result of the contraventions committed by Viplus Pty Ltd as identified in declaration (2) hereof Viplus underpaid the following employees the following amounts:
(i)$3,553.81 to Yi Chi Shih;
(ii)$569.58 to Jason Wang;
(iii)$1,317.98 to Chen Shen;
(iv)$3,385.36 to Karthick Elangovan;
(v)$5,080.16 to Yizhou Zhang;
(vi)$232.64 to Monisha Karthick;
(vii)$2,715.34 to Dai Xing;
(viii)$985.86 to Selveraj Sowkarthick;
(ix)$1,159.45 to Seker Sudharsan; and
(x)$125.40 to Shih Yun Huang.
THE COURT ORDERS THAT:
The application be adjourned to 29 September, 2017 at 10:00am for a further hearing to determine the penalty that should be imposed on each of the Respondents, to be fixed concurrently with matter BRG1115/2015 Fair Work Ombudsman v Vipper Pty Ltd and Jason Yuan.
The Applicant file and serve submissions and any evidence relating to penalty no later than 35 days prior to the hearing fixed pursuant to paragraph 5.
The Respondents file and serve submissions and any evidence relating to penalty no later than 21 days prior to the hearing fixed pursuant to paragraph 5.
The Applicant file and serve any submissions and evidence in reply no later than 7 days prior to the hearing fixed pursuant to paragraph 5.
Evidence and submissions filed in this application also stand as evidence and submissions filed in matter BRG 1115/2015 Fair Work Ombudsman v Vipper Pty Ltd and Jason Yuan.
IN PROCEEDINGS BRG 1115 of 2015:
THE COURT DECLARES THAT:
Vipper Pty Ltd:
(a)s.45 of the Fair Work Act 2009 (Cth), by virtue of a contravention of clause 13.2 and clause A.5.4 of the General Retail Industry Award 2010 by failing to pay its employees the applicable casual loading;
(b)s.45 of the Fair Work Act 2009 (Cth), by virtue of a contravention of clause 29.4(b) and clause A.7.3of the General Retail Industry Award 2010 by failing to pay the applicable Saturday loading to its employees;
(c)s.45 of the Fair Work Act 2009 (Cth) by virtue of contraventions of clause 29.4(d) and clauses A.6.4 and A.7.3 of the General Retail Industry Award 2010 by failing to pay the Public Holiday Loading to its employees;
(d)s.45 of the Fair Work Act 2009 (Cth) by virtue of contraventions of clauses 30.3(a) and clause A.7.3 of the General Retail Industry Award 2010 by failing to pay Weekday Shiftwork Rates to its employees;
(e)s.45 of the Fair Work Act 2009 (Cth) by virtue of contraventions of clauses 30.3(b) and A.7.3 of the General Retail Industry Award 2010 by failing to pay Saturday Shiftwork Rates to its employees;
(f)s.536(2) of the Fair Work Act 2009 (Cth), by providing pay slips to its employees that did not accurately state the gross and net amounts paid to the employees or amounts paid to the employees in respect of a loading or penalty;
(g)s.536(1) of the Fair Work Act 2009 (Cth), by failing to provide payslips within one day of payment; and
(h)s.535(1) of the Fair Work Act 2009 (Cth) by failing to make records which complied with the requirements of regulation 3.33(3) of the Fair Work Regulations2009 (Cth).
Jason Yuan was involved in each of the contraventions committed by Viplus Pty Ltd as identified in declaration (1) hereof.
As a result of the contraventions committed by Vipper Pty Ltd as identified in declaration (1) hereof Vipper Pty Ltd underpaid the following employees the following amounts:
(a)$800.78 to Muhammad Azam;
(b)$419.08 to Yu-Heng Huang;
(c)$2,312.67 to Syed Baquar Khumaini;
(d)$98.36 to Jonathan Liang;
(e)$536.11 to Yi-Chin Pan;
(f)$293.28 to Yen Ting Pan;
(g)$668.66 to Chen Shen;
(h)$4,384.48 to Ashok Thurpu;
(i)$208.89 to Wei Qi Tang;
(j)$2,019.44 to Harshavardman Yepuru; and
(k)$639.94 to Jiye Zhu.
THE COURT ORDERS THAT:
The application be adjourned to 29 September 2017 at 10:00am for a further hearing to determine the penalty that should be imposed on each of the Respondents, to be fixed concurrently with matter BRG1114/2015 Fair Work Ombudsman v Viplus Pty Ltd and Jason Yuan.
The Applicant file and serve submissions and any evidence relating to penalty no later than 35 days prior to the hearing fixed pursuant to paragraph 4.
The Respondents file and serve submissions and any evidence relating to penalty no later than 21 days prior to the hearing fixed pursuant to paragraph 4.
The Applicant file and serve any submissions and evidence in reply no later than 7 days prior to the hearing fixed pursuant to paragraph 4.
Evidence and submissions filed in this application also stand as evidence and submissions filed in matter BRG 1114/2015 Fair Work Ombudsman v Viplus Pty Ltd and Jason Yuan.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG1114 of 2015
| FAIR WORK OMBUDSMAN |
Applicant
And
| VIPLUS PTY LTD |
First Respondent
| JASON YUAN |
Second Respondent
BRG1115 of 2015
| FAIR WORK OMBUDSMAN |
Applicant
And
| VIPPER PTY LTD |
First Respondent
| JASON YUAN |
Second Respondent
REASONS FOR JUDGMENT
Viplus Pty Ltd and Vipper Pty Ltd each conduct a 7-Eleven Store franchise in the Brisbane central business district. The former conducts a store in Adelaide Street and the latter a store in George Street, Brisbane. The second respondent, Jason Yuan is a director of each company. He manages both companies and their 7-Eleven stores. He is assisted in doing so by his wife Irene. Mr Yuan spends most of his time in the Adelaide Street store and his wife spends most of her time in the George Street store.
These proceedings concern alleged contraventions of the Fair Work Act 2009 (Cth), the Fair Work Regulations 2009 (Cth) and the General Retail Industry Award 2010 by both Vipper and Viplus in the course of conducting their 7-Eleven businesses. The applicant alleges that Mr Yuan was knowingly concerned in all of the contraventions by each of the companies.
On the first court date for each proceeding (which occurred on the same date and were dealt with together) the parties agreed that both applications should be dealt with concurrently. The respondents were legally represented when that agreement was reached. Directions were made by the Court to formalise that agreement.
By its defence, save for one immaterial exception, Vipper admitted all of the allegations made against it. Mr Yuan made some qualified admissions, but otherwise denied the allegations of accessorial liability against him.
By its defence, Viplus admitted all of the allegations of contravention against it, however took issue with the classification ascribed by the applicant to two of Viplus’ employees referred to in the material as Chi Chi and Karthick. The correct classification of those employees is relevant to the rates of pay to which those employees were entitled when employed by Viplus and the amount of any underpayment now owed to them. Again, Mr Yuan made some qualified admissions, but otherwise denied the allegations of accessorial liability made against him.
The contraventions alleged against the companies concern underpayment of wages and certain pay slip and record keeping matters. Broadly, Mr Yuan admits accessorial liability for the payslip and record keeping obligations not met by the companies. However, he disputes accessorial liability for those contraventions related to the underpayment of wages where the incorrect loading or penalty rate was applied as he denies knowing that the amounts paid by Vipper and Viplus were insufficient to meet each company’s legal obligations.
In both proceedings, the parties have filed a statement of agreed facts recording the admissions made by each of the respondents. The statements include detailed particulars as to the contraventions including the employees underpaid, the amount of the underpayments and the respects in which they were underpaid. Setting out the particulars of those contraventions is not necessary for these reasons.
Both proceedings were listed for trial in relation to the disputed matters going to liability. The parties have filed written submissions. The respondents’ submissions were prepared and filed by their lawyers. However, soon after the submissions were filed the lawyers withdrew from acting for the respondents.
Mr Yuan appeared at the liability hearing on his own behalf. I confirmed with him that he did not seek to appear for the companies Viplus Pty Ltd and Vipper Pty Ltd. The first respondents are, therefore, unrepresented.
Each witness relied upon by each party gave their evidence-in-chief by way of affidavit. Each party took some objections to the evidence of the opposing party. The objections were reduced to writing and I ruled on the objections. I marked up my preliminary rulings on copies of the written objections, provided them to the parties and invited argument on any ruling that was not accepted. There was further argument relating to one matter, but otherwise the parties accepted my preliminary rulings. Although I did not do so during the trial, it is appropriate to mark those written objections with my preliminary rulings marked on them as exhibits in the proceedings. Accordingly, the objections taken by the respondents to the applicant’s evidence will be exhibit 1 and the applicant’s objections to the respondents’ evidence will be exhibit 2.
Mr Yuan chose not to cross-examine any of the witnesses from whom the applicant led evidence-in-chief. Counsel for the applicant cross-examined Mr Yuan.
These reasons contain my findings on liability in respect of both proceedings.
Background
Mr Yuan is about 61 years of age. He has lived in Australia permanently since about 2000. His primary language is Mandarin although he has a working knowledge of English. He was cross-examined without the assistance of an interpreter and demonstrated no difficulty with understanding or answering the questions asked of him. He has tertiary qualifications gained in the United States of America and a long history of working in finance and property related businesses.
Mr Yuan is the store manager for both the George Street 7-Eleven and the Adelaide Street 7-Eleven. He spends most days, however, at the Adelaide Street store and his wife works at the George Street store.
During the day, both the George Street store and Adelaide Street store are generally operated by Mr Yuan and Mrs Yuan with the assistance of a single employee working at each store. In the evenings and at night, each store is generally manned by a single employee working alone.
Mr Yuan has responsibility for:
a)undertaking the daily and weekly cash reconciliations;
b)ordering new stock;
c)hiring new employees;
d)doing the banking;
e)doing the rostering;
f)organising back up staff if someone calls in sick or is unavailable;
g)doing the payroll;
h)overseeing and managing all employees (including those working at night);
i)dealing with customer complaints;
j)entering the invoices; and
k)dealing with 7-Eleven.
Viplus’ employees Chi Chi and Karthick
The issue concerning the appropriate employee classification of Chi Chi and Karthick is relevant only in the Viplus proceedings (BRG1114/2015)
The allegations made by the applicant in these proceedings concern the period 9 September, 2013 and 14 September, 2014. Between 9 September, 2013 and 4 April, 2014 Yi Chi Shih (referred to in the evidence of all parties as “Chi Chi”) was employed by Viplus Pty Ltd. Initially she started as a casual employee, but later became a full-time employee. She generally worked 40 hours per week, Monday to Friday. Generally she worked in the Adelaide Street store. She resigned in April, 2014.
According to Mr Yuan’s evidence Chi Chi worked at the front of the store while he worked out the back in the office.
Karthick Elangovan was employed by Viplus Pty Ltd at the Adelaide Street store from 9 September, 2013 to at least 14 September, 2014. Initially, he too, was employed on a casual basis. When Chi Chi resigned, Mr Yuan offered Karthick the opportunity to work full-time and to take over from Chi Chi. He commenced in that role on about 30 June, 2014. He generally worked in the Adelaide Street store. He too generally worked at the front of the store while Mr Yuan worked out the back in the office.
Between 9 September, 2013 and 14 September, 2014 both Viplus and Vipper had at least eight other employees who worked at various times.
The applicant contends that Chi Chi and Karthick were each properly categorised as a Retail Employee Level 3 for the purposes of the Award. Mr Yuan contends that they were properly categorised as Retail Employee Level 1. At best, he says, they were “candidates” for the position of store manager.
Mr Yuan argues that Chi Chi and Karthick generally performed the same duties as every other employee, including general cashier duties, putting away stock and cleaning. They performed additional duties in that they were required to regularly undertake the stocking up of cigarettes and tobacco.
The evidence discloses that when Mr Yuan took holidays, Chi Chi and Karthick would be asked to:
a)undertake the banking; and
b)act as a point of contact for 7-Eleven while Mr Yuan was away.
Whilst Mr Yuan maintains that Chi Chi and Karthick were properly classified as Retail Employee Level 1, he accepts that Chi Chi and Karthick were requested to “act up” undertaking higher duties when he was on annual leave. However, Mr Yuan argues that such arrangements are common in most workplaces and notes that clause 20.12 of the Award makes special provision for such arrangements to occur.
Mr Yuan submits that evidence of Chi Chi and Karthick undertaking “additional duties” when he was absent on leave, cannot be accepted as evidence of the duties performed by Chi Chi and Karthick during periods when he was present in the store.
Employee classifications
Schedule B.1.1 of the Award sets out the functions performed by an employee at a retail establishment for a Retail Employee Level 1.
Schedule B.2.1 provides that a Retail Employee Level 2 is an employee performing work at a retail establishment at a higher skill level than a Retail Employee Level 1.
Schedule B.3 of the Award provides that a Retail Employee Level 3 is:
B. 3. 1 An employee performing work at a retail establishment at a higher level than a Retail Employee Level 2.
B.3.2 Indicative of the tasks which might be required at this level are the following:
• Supervisory assistance to a designated section manager or team leader,
• Opening and closing of premises and associated security,
• Security of cash, or
• Fitting of surgical corset.
B. 3. 3 Indicative job titles which are usually within the definition of a Retail Employee 3 include:
• Machine operators,
• 2IC to Dept Manager,
• Senior Salesperson,
• Corsetiere,
•Driver Selling Stock,
• Cook (Not Qualified) in a cafeteria
• Senior LPO, including an armed LPO,
• LPO Supervisor,
• Designated second-in-charge of a section (i.e. senior sales assistant),
• Designated second-in-charge to a service supervisor, or
•Person employed alone, with responsibilities for the security and general running of a shop.
The parties agree on the principles that apply to working out the proper classification of an employee pursuant to an Award. An industrial award or instrument is to be given its plain and ordinary meaning and is to be construed in context having regard to the subject matter and text of the instrument as a whole. The provisions of an award should not be interpreted strictly or literally, narrowly or pedantically or be interpreted in a vacuum divorced from industrial realities.
Both parties directed my attention to Carpenter v Corona Manufacturing Pty Ltd (2002) 122 IR 387 where the Full Bench of the Australian Industrial Relations Commission said with respect to determining the classification of an employee:
[9] In determining whether or not a particular award applies to identified employment more is required than a mere quantitative assessment of the time spent in carrying out various duties. An examination must be made of the nature of the work and the circumstances in which the employees employed to do the work with a view to ascertaining the principal purpose for which the employee is employed.
Further, the respondents directed my attention to McMenemy v Thomas Duryea Consulting (2012) 223 IR 125 in which the Full Bench of the Fair Work Commission said:
...consistent with the decision (in Carpenter) an own employee’s estimation of the quantification of their workload is not determinative of the classification, if any, in an award, into which they might fall. One reason for this (and there will be more) is that an employee might perform duties (where they are not closely supervised) which the employee prefers, or believes to be required, but which are not the duties the employee is necessarily directed (or employed) to perform. This is why the Full Bench [in Carpenter] articulated the task of ascertaining the principal purpose of the employment as requiring “an examination of the nature of the work [ ] the employee is employed to do”...
Mr Yuan submits that the “principal purpose” for Chi Chi’s and Karthick’s employment was to undertake general cashier and retail duties, such as putting stock away so that Mr Yuan could attend to the general running of the stores. Mr Yuan gave evidence to that effect.
There is no dispute that Chi Chi’s and Karthick’s ordinary duties included:
a)serving customers;
b)stocking shelves;
c)receiving payment for goods and providing change and receipts to customers;
d)cleaning; and
e)putting away deliveries.
There is no dispute that those tasks and duties are consistent with an employee correctly classified as a Retail Level 1 Employee.
Mr Yuan accepts that the evidence also demonstrates that each of Chi Chi and Karthick (for the relevant periods) performed work at a higher level than Retail Level 1 and Retail Level 2, including by being principally employed as “second-in-charge”, having at times responsibilities for the security and general running of the store, and providing some supervisory assistance. Those higher duties were generally undertaken when Mr Yuan was on leave. Chi Chi undertook those duties during the periods 20 November, 2013 to 5 December, 2013; 12 February, 2014 to 24 February, 2014 and 7 April, 2014 to 21 April, 2014 when Mr Yuan was on leave. Karthick did the same during the period 30 August, 2014 to 18 September, 2014. But Mr Yuan argues that the performance of those duties was within what could be expected of a lower classified employee acting up in a higher capacity on a limited basis.
The applicant contends that the evidence demonstrates that Chi Chi was consistently performing duties that would demonstrate that she is properly classified as a Level 3 employee. The applicant led evidence from two district managers of 7-Eleven – Mr Paulo dos Santos and Mr Matthew Patterson. Their evidence establishes that:
a)Employees from 7-Eleven head office conducted site visits of franchisee stores, attended by either (or both) of the franchisee owner and the store manager, approximately once per fortnight. The business of the meeting was always summarised in writing in a document called a “Communications Recap” prepared by the Head Office representative. The document would record “key issues”, “concerns” or “action items” discussed at the meeting.
b)During the period 12 April, 2013 to 4 May, 2014 Chi Chi attended eight of 27 site visits, six of which were without Mr Yuan. The records demonstrate that no other employees attended site visits during that period despite Mr Yuan’s oral evidence that there was often a second employee in the store when a District Manager visited for a franchisee site visit. The reference to Chi Chi only, is in my view significant because it tends to show that she had some greater standing or responsibility within the store.
c)The records of the site visits of the Adelaide Street store show that:
i)Chi Chi was involved in discussions in relation to many things, including sales, promotions and the appearance of the store; and
ii)Chi Chi was assigned action items in relation to many things including:
(1)communicating sales targets and promotions to staff;
(2)measuring results as well as coaching and motivating staff with sales;
(3)tidying the store;
(4)ensuring all staff wear a uniform;
(5)changing confectionary layouts for the store;
(6)training staff;
(7)marking down products; and
(8)working through a store action plan.
iii)Chi Chi:
(1)participated in a customer service and sales promotion coaching session;
(2)ordered stock; and
(3)changed display layouts.
iv)Karthick was involved in discussions in relation to:
(1)challenges with receiving deliveries;
(2)promotions and upsetting;
(3)informing head office of problems with store machinery;
(4)pests in store; and
(5)store financials.
v)Karthick was assigned action items including:
(1)fixing and monitoring store machinery problems;
(2)communicating sales targets and promotions to staff;
(3)reviewing those results on a weekly basis and coaching staff on how to improve those results;
(4)discussing sales issues with staff; and
(5)ensuring staff understood robbery prevention instructions.
vi)Karthick:
(1)wrote action plans;
(2)reviewed the refunds on a daily basis;
(3)could navigate the computer system and the means of access to it located in the store known as the “Store Portal”; and
(4)requested additional CCTV cameras for monitoring theft.
Both Chi Chi and Karthick were identified as “the manager” by other employees, the District Manager and by Mr Yuan. In that respect, the applicant led evidence from Fair Work Inspector Nathan Forward who gave evidence that on 5 December, 2014 he and another Fair Work Inspector met with Mr Yuan at the George Street 7-Eleven store. During that conversation, Mr Yuan identified Karthick as the manager. Time sheet reports also identified Karthick as the manager. Other documents completed by Mr Yuan identified Chi Chi as the store manager. Chi Chi was also identified as the manager by other employees and the Head Office District Manager and had access to the computer in the back office.
Chi Chi attended a 7-Eleven Franchisee Training Course in Melbourne between 28 October, 2013 and 14 November 2013 and was identified as a “manager” at that course. The course was paid for by Viplus. Karthick had also been asked to do such a course.
The applicant argues that the above matters clearly evidence that Chi Chi and Karthick performed duties at a higher level than other employees. They had responsibility for running the store such as ordering stock and changing its layout, coaching and motivating staff, banking and assisting with rostering, and were “second-in-charge”.
I reject Mr Yuan’s case that both Chi Chi and Karthick primarily worked alone with him and were not required to supervise other employees. That is contrary to the Communications Recaps completed by the managers from 7-Eleven head office and Mr Yuan’s evidence to the Fair Work Inspectors.
The evidence demonstrates, in my view, that Chi Chi and Karthick were senior employees to whom Mr Yuan trusted responsibilities not entrusted to other employees. They were his only two full-time employees and on his own evidence at times ran the store without assistance. But the evidence demonstrates that they did much more than that and were considered to occupy a managerial type role by other employees and Mr Yuan who described them as managers.
I am satisfied that both Chi Chi and Karthick should properly be classified as a Retail Employee Level 3. I am satisfied that they performed higher duties than those described for a Retail Employee Level 1 as defined in the Award. I am also satisfied that they performed duties at a higher level than a Retail Employee Level 2 having regard to the indicative tasks and job titles for that level. The real purpose of their employment was to be second-in-charge and to be able to run and manage the stores (both the Adelaide Street store and the George Street store) when Mr Yuan was not available to do so. That they might not have done that all of the time is not to the point. The evidence clearly demonstrates that they had managerial responsibilities generally and assisted in running the Adelaide Street store. That Mr Yuan had the day to day responsibility for the general running and security of the store and would regularly attend work seven days per week, including both during the day and at night, does not detract from that proposition. It is clear that although Mr Yuan was responsible for the supervision of all employees generally, supervisory duties also fell to Chi Chi and later Karthick.
Mr Yuan’s accessorial liability
The starting point is s.550 of the Fair Work Act. It provides:
(l) A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.
(2) A person is involved in a contravention of a civil remedy provision if, and only if, the person:
(a) has aided, abetted, counselled or procured the contravention; or
(b) has induced the contravention, whether by threats or promises or otherwise; or
(c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d) has conspired with others to effect the contravention.
Again, the parties largely agree on the principles to be applied. To be “knowingly concerned” in a contravention, a person must have knowledge of the essential facts constituting the contravention and be an intentional participant in it, the necessary intent being based on knowledge of the essential elements of the contravention. However, knowledge of the law is not required; that is to say, for a person to be liable as an accessory they need not know that certain conduct amounts to a contravention. All that is required is knowledge of the essential facts which constitute the contravention.
The authorities that bind this Court demonstrate that this means that the alleged accessory must have knowledge of the relevant award said to have been contravened. Both parties directed my attention to the same authorities to which, out of deference to their arguments, I will refer.
In Potter v Fair Work Ombudsman [2014] FCA 187 at [81] Cowdroy J said:
Knowledge that the Clerical NAPSA applied to the Employees is not identical to knowledge that a failure to pay the Employees in accordance with the Clerical NAPSA constitutes a breach of a civil remedy provision, although it is undeniable that the difference is a small one. The Court finds that, to be an accessory to the underpayment contraventions, Mrs Potter must have known the Clerical NAPSA applied to the Employees. It is not difficult to imagine a situation in which directors of a company honestly but mistakenly arrange for the company’s employees to be paid under an incorrect award. There would be no doubt that the company had underpaid its employees, and by virtue of that fact, contravened the FW Act. If the position were as the FWO submits however, the directors would be liable as accessories to those contraventions simply because they knew how much the employees were being paid and because they had knowledge of the existence of the applicable award, even though they honestly believed that such award did not apply.
In Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365 White J, when considering the decision of Fair Work Ombudsman v Al Hilfi [2012] FCA 1166, said:
[184] Besanko J considered a similar question in the context of a summary dismissal application in Fair Work Ombudsman v Al Hilfi [2012] FCA 1166. The allegation in that case was that Coles Supermarkets Ltd was liable as an accessory in respect of the underpayment of wages to trolley collectors employed by a subcontractor. Coles submitted that the FWO had to establish that it had actual knowledge of the following matters:
(i) that the four employees who were the subject of the claim were employed by Mr Ali Hilfi during the relevant period;
(ii) that the Cleaning Services Award 2010 applied to the employment of those employees;
(iii) that the work of each of the employees gave rise to the specific entitlements alleged;
(iv) that the employees were not paid those entitlements by Mr Al Hilfi.
Ultimately, it was not necessary for Besanko J to decide the correctness of the position asserted by Coles, but he did say (at [44]) that there was “a good deal of force” in its submission.
…
[188] …I consider that the claims of accessorial liability in this case should be determined in accordance with the principles stated in Potter and Al Hilfi. That is because knowledge that there is an award which is applicable which prescribes minimum rates or entitlements is a factual element necessary for the establishment of the accessory’s intention.
An example of the approach is to be found in Fair Work Ombudsman v Complete Windscreens (SA) Pty Ltd [2016] FCA 621, where Besanko J explained:
[309]……The FWO suggested that there was a difference between the approach in Potter and the approach in Devine Marine Group. I do not need to address this submission because it was common ground between the parties, and I think it is correct that, taking the meal breaks as an example, the FWO must prove that Mr Lindsay Dean knew that the relevant employees were governed by an industrial award and that the award stipulated minimum meal breaks and that the meal breaks actually provided were less than stipulated under the award before he is held liable under s 728 of the WR Act and s 550 of the FW Act.
However, other cases suggest a divergence of views: Australian Building and Construction Commissioner v Parker [2017] FCA 564 at [127]; Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034; 152 ALD 209 at [1019] and see Fair Work Ombudsman v South Jin Pty Ltd [2015] FCA 1456 at [229]. In obiter in Grouped Property Services, Katzmann J said:
[1019]. The Ombudsman submits that the test set by Potter is too high. I am inclined to agree. Where the contravention is a failure to pay award rates, an accessory must know what rates are being paid but need not know that the rates which were paid were below the rates prescribed by the applicable award. As White J acknowledged in South Jin at [229], “[a]n accessory does not have to appreciate that the conduct involved is unlawful”.
To paraphrase the approach taken in Devine Marine, the essential facts amounting to Viplus’ contraventions of which Mr Yuan had to have actual knowledge were that:
a)each employee the subject of the allegations in these proceedings was entitled to casual loading in addition to their minimum hourly rates; and
b)each employee was entitled to penalty rates and other loadings in respect of their work on various occasions such as weekends and public holidays.
Even if the applicant must establish actual knowledge by Mr Yuan that:
a)the relevant employees performed work for Viplus or Vipper as the case may be;
b)that they did so as employees;
c)that their work was governed by an Industrial Award (whether or not he knew of the name of the Award);
d)that the Award stipulated minimum rates of pay; and
e)that the amounts Viplus and Vipper paid to the employees were less than those minimum rates.
I am satisfied that the applicant has established those propositions.
The statements of agreed facts filed in both proceedings make it clear that in respect of the business of both Vipper and Viplus, Mr Yuan:
a)was responsible for the operation and financial management of the businesses;
b)was responsible for ensuring the companies complied with their legal obligations under the Fair Work Act;
c)was responsible for the engagement of the employees of each company;
d)was responsible for the management of the employees of each company;
e)was responsible for rostering the employees of each company to work;
f)was responsible for setting the rates of pay paid to the employees of both companies;
g)was responsible for inputting data into the payroll system used by the companies;
h)was present at the businesses’ premises on a regular basis;
i)had access to the rosters and time books which recorded the employees’ hours of work for each company;
j)had access to, and was aware of, a document titled ‘Shift Duties Checklist’ setting out the duties of the employees for each company;
k)was involved in preparing the weekly employee rosters for each company;
l)determined the employees’ rates of pay;
m)entered the employees’ hours of work into the payroll system used by each company;
n)entered wage rates into the payroll systems;
o)made cash payments to some of the employees for work performed on public holidays;
p)knew the duties each of the companies’ employees performed;
q)knew the shifts each of the employees performed in a week;
r)knew the total amount paid, including cash payment, to the companies’ employees; and
s)knew the hours worked by the companies employees at relevant times.
Mr Yuan had commenced operating a 7-Eleven franchise in 2000. He was no stranger to the business and from 29 October, 2001 to 16 November, 2001 the second respondent undertook franchisee training provided by 7-Eleven Stores Pty Ltd.
The parties agree that since 2010 Mr Yuan has received annually a copy of an Award wage rate summary from the 7-Eleven Corporate Headquarters, which sets out the applicable Award and the ordinary time rates of pay, the applicable casual penalty rates, shift work penalties, weekend penalty rates, Public Holiday penalties and allowances prescribed by the Award. They also agree that Mr Yuan received copies, or versions of those Award rate summaries in or around June or July each year since 2010. Mr Yuan’s evidence-in-chief confirms that he received those documents and that he knew there was a General Retail Industry Award because he had seen the name referred to in memos from 7-Eleven and “also in the pay charts”. He also knew that the Award set the minimum rate of pay for casual, full-time and part-time employees.
Mr Yuan signed documents described as “New Employee forms” that were completed when new employees were engaged by one or other of the companies on which was stated the hourly rate of pay for the relevant employee, whether the employee was casual and whether the rate of pay was the Award rate or higher.
Here, Mr Yuan made much of the fact that he did not know that the rates that Viplus was paying to its employees for times they worked which attracted loadings of penalties, were below the Award rate or were not in accordance with the Award. His evidence is that he:
a)relied upon 7-Eleven and the payroll system that was used to pay employees’ wages to pick up any mistakes he might make concerning payroll;
b)he was acting in accordance with advice he had received from the person from whom he had purchased the business who told him that casuals were paid a flat rate and that they were paid double time if they worked on Sundays or holidays; and
c)no person ever suggested to him that he was not paying the correct wages to the employees.
However, even if that was so, Mr Yuan’s argument does not lead to the conclusion that he was not knowingly concerned in Viplus’ contraventions. The evidence establishes that:
a)Mr Yuan knew that there was an Award applicable to the employment of Viplus’ employees;
b)he knew the name of the Award; and
c)he knew that the Award prescribed pay rates for his employees and that the pay rates varied depending upon the classification of the employees and when they performed their work.
To the extent that he sought to suggest that he did not appreciate that there were special rates to be paid for weekend work or for shift work, I found his evidence unpersuasive. He acknowledged that he had been given information by 7-Eleven Head Office about Award rates of pay each year. I found his evidence that he only had regard to one or two lines on those documents disingenuous. Mr Yuan gave evidence in cross-examination that, despite what he swore in his affidavit of evidence-in-chief, he could read and understand the documents concerning wages that were given to him by 7-Eleven. He found numbers easier to understand than words. He did not explain why he accepted the advice of the person from whom he had purchased the business many years earlier to the documents provided to him by 7-Eleven on at least a yearly basis.
Moreover, one of Mr Yuan’s other employees had complained to the Fair Work Ombudsman about underpayment of wages. That was investigated and resolved by Mr Yuan causing Viplus to make a payment to that employee. Arising from the applicant’s investigation of that complaint, on 5 February, 2013 Mr Yuan received a two page Letter of Caution from the applicant concerning the underpayment of wages to its employees. That letter served to highlight the applicability of the Award and the importance of paying employees in accordance with the pay rates set out in the Award.
Much of Mr Yuan’s case concerning accessorial liability relies upon his assertion that he did not understand, or fully understand the obligation of employers to pay employees particular rates of pay which depended upon when they performed their work or the sources of those obligations. He said that he did not understand what a shift worker was.
However, he did not have to know that the companies’ conduct was unlawful: South Jin at [229].
I find that Mr Yuan had the actual knowledge of the facts giving rise to the companies’ contraventions necessary to engage s.551(1) of the Fair Work Act.
Conclusion
For the reasons I have expressed above, I am satisfied that:
a)Chi Chi was properly classified as Retail Employee Level 3 during the period 9 September, 2013 to 4 May, 2014;
b)Karthick was properly classified as Retail Employee Level 3 during the period 30 June, 2014 to 14 September, 2014; and
c)Mr Yuan is liable as an accessory for each of the contraventions committed by Vipper and Viplus.
Accordingly, I make the declarations set out at the commencement of these reasons.
I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of Judge Jarrett
Date: 20 July, 2017
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