Fair Work Ombudsman v VS Investment Group Pty Ltd
[2013] FCCA 208
•7 May 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v VS INVESTMENT GROUP PTY LTD & ANOR | [2013] FCCA 208 |
| Catchwords: INDUSTRIAL LAW – Civil penalty provisions – underpayments –considerations relevant to penalty. |
| Legislation: Fair Work Act2009, ss.45, 512(3), 526(2), 536, 536(1), 536(1)(ii), 536(2), 536(2)(b), 546(2), 557(1), 712(3) Fair Work (Transitional Provisions and Consequential Amendments) Act2009 Federal Magistrates Court Rules2001, rr.13.03A(2)(b)(iii), 13.03B(2)(c) Workplace Relations Act1996 Workplace Relations Regulations2006 |
| Cases cited: Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433 Australian Building and Constructions Commissioner v Abbot (No.3) [2011] FCA 340 Australian Competition and Consumer Commission v Yellow Page Marketing BV (No.2) [2011] FCA 352 Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd (2006) 236 ALR 665 Australian Ophthalmic Suppliers Pty Ltd v McAlary-Smith [2008] FCAFC 8 Colis v MacPherson (2007) 169 IR 30 CPSU v Telstra Corporation Limited (2001) 108 IR 228 Fair Work Ombudsman v Bedington [2012] FMCA 1133 Fair Work Ombudsman v Contracting Plus Ply Ltd v Anor-[2011] FMCA 191 Fair Work Ombudsman v Kensington Management Services Pty Ltd (No.2) [2012] FMCA 586 Fair Work Ombudsman v Kingsford Carwash Pty Ltd & Anor (No.2) [2012] FMCA 1210 Fair Work Ombudsman v Praglowski [2010] FMCA 621 at [49] Fair Work Ombudsman v Promoting U Ply Ltd & Anor [2012] FMCA 58 Fair Work Ombudsman v Security Protection Services Pty Ltd & Ors [2010] FMCA 252 Gibbs v Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216 Kelly v Fitzpatrick [2007] FCA 1080 McIver v Healey [2008] FCA 425 Mason v Harrington Corporation Ply Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 Mornington Inn Pty Ltd v Jordan (2008) FCAFC 70 Plancor Pty Ltd v Liquor Hospitality and Miscellaneous Union (2008) 171 FCR 357 Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 Rajagopalan v BM Sydney Building Materials Ply Ltd [2007] FMCA 1412 Seymour v Stawell Timber Industries Pty Ltd (1985) 9 FCR 241 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | VS INVESTMENT GROUP PTY LTD (ACN 116 532 677) (IN LIQUIDATION) |
| Second Respondent: | SCOT STUART MURPHY |
| File Number: | BRG 1155 of 2011 |
| Judgment of: | Judge Jarrett |
| Hearing date: | By written submission |
| Date of Last Submission: | 24 August, 2012 |
| Delivered at: | Brisbane |
| Delivered on: | 7 May 2013 |
REPRESENTATION
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| No appearance for the First Respondent |
| The Second Respondent appeared in person |
ORDERS
WITH THE CONSENT OF THE PARTIES THE COURT DECLARES THAT:
the First Respondent contravened sub-Item 2(1) and Item 5 of Schedule 16 of the Fair Work (Transitional Provisions and Consequential Amendments) Act2009;
the First Respondent contravened each of s.45 of the Fair Work Act2009;
the First Respondent contravened s.536 of the Fair Work Act2009;
the First Respondent contravened s.712(3) of the Fair Work Act 2009; and
the Second Respondent contravened sub-item 2(1) and Item 5 of Schedule 16 of the Transitional Act and ss.45, 536 and 712(3) of the Fair Work Act2009.
THE COURT ORDERS THAT:
pursuant to s.546(1) of the Fair Work Act2009, the second respondent pay the following penalties:
(a)in respect of the contraventions of sub-Item 2(1) and Item 5 of Schedule 16 of the Fair Work (Transitional Provisions and Consequential Amendments) Act2009 and s.45 of the Fair Work Act2009, $10,560;
(b)in respect of the contraventions of s.536 of the Fair Work Act2009, $1,320.00;
(c)in respect of the contraventions of s.712(3) of the Fair Work Act2009, $3,300.
Within fourteen days of the date of these orders, the applicant file a minute of the orders sought relating to the distribution of the penalties set out above.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 1155 of 2011
| FAIR WORK OMBUDSMAN |
Applicant
And
| VS INVESTMENT GROUP PTY LTD (ACN 116 532 677) (IN LIQUIDATION) |
First Respondent
| SCOT STUART MURPHY |
Second Respondent
REASONS FOR JUDGMENT
The issue in this application is the penalty which should be imposed upon the second respondent Mr Murphy for his involvement in a number of breaches of certain industrial awards and other instruments arising out of the first respondent’s employment of a number of employees.
The relevant breaches occurred between December, 2009 and February, 2010. During that period the first respondent conducted a retail take-away food establishment. It employed 27 employees over that period each of whom was not paid the correct rate of pay having regard to the industrial instruments that applied to their employment.
These proceedings are no long pursued against the first respondent because on 22 February, 2012 it was placed into liquidation.
The relevant industrial instruments
Between 1 December, 2009 and 31 December, 2009 the first respondent’s employees were entitled to be paid basic periodic rates of pay for their relevant classification pursuant to the Retail Take Away Food Award South Eastern Division 2003 – State which operated, by reason of Item 2 in Part 2 of Schedule 3 of the Fair Work (Transitional Provisions and Consequential Amendments) Act2009, as an award based transitional instrument. That award provided for the engagement and payment of casual and part time employees and prescribed the basic rates of pay and the payment of overtime. Further, the employees’ employment was governed by a preserved Australian Pay and Classification Scale derived from the award which applied to the employees employment pursuant to sub-item 5(3) Part 3 of Schedule 9 of the Transitional Act. The Australian Pay and Classification Scale provides for the classification descriptions and coverage provisions which were derived from the award.
During January and February, 2010 the employment of the subject employees was governed by the Fast Food Industry Award 2010. That award provided for pay classifications, coverage and minimum rates of pay. It provided for the engagement and payment of part time and casual employees and for the payment of overtime in respect of evening work, Saturday and Sunday penalty rates.
The breaches
The applicant alleges that the first respondent contravened the provisions of the Fair Work Act2009 because, in respect of the subject employees it did not:
a)pay to the employees the basic periodic rates of pay prescribed for the relevant periods;
b)did not pay casual loadings as prescribed under the award based transitional instrument;
c)did not pay overtime in accordance with the award based transitional instrument during December 2009;
d)did not pay to the employees their hourly rates of pay under the Fast Food Industry Award in January and February 2010;
e)did not pay to the subject employees overtime in accordance with the Fast Food Industry Award;
f)did not pay a particular employee, Mr Trinder for all hours he worked during the period of his employment; and
g)failed to pay Mr Trinder:
i)the correct hourly rate of pay;
ii)evening work allowances;
iii)Saturday penalty rates; and
iv)Sunday penalty rates.
Certain other breaches by the first respondent are alleged against it and the second respondent (and admitted by the second respondent). They relate to the failure by the first and/or second respondent to provide payslips to one of its employees, Mr Steven Trinder in contravention of s.536(2)(b) of the Fair Work Act and failure to supply a pay slip that specified the relevant information prescribed by s.536(2)(b) of the Fair Work Act.
Finally, it is alleged, and the second respondent admits, that the first respondent did not comply with a notice to produce properly served upon it in contravention of s.512(3) of the Fair Work Act.
The employees concerned in the contraventions are set out in the table appended to the statement of agreed facts filed on 7 August, 2012 along with the rates of pay that they received and the rates they ought to have received.
The breaches of the provisions relating to casual loading, overtime and penalty rates for weekend and other work are not particularised in the statement of claim but are contained in the table appended to the statement of agreed facts.
Grouping of the contraventions
The parties agree that the approach to be adopted in determining the appropriate penalty to impose in this case is for the Court to:
a)Identify each occurrence of the contraventions. Each contravention of each separate obligation in the Transitional Act and the Fair Work Act is a separate contravention of the provisions of the Fair Work Act and the Transitional Act and should be identified individually.
b)The Court must have regard to s.557(1) of the Fair Work Act. It is said that it “has the effect that, where two or more contraventions of a civil remedy provision are committed by the same person and the contraventions arose out of a course of conduct by the person, those contraventions are taken to constitute a single contravention.”
c)To the extent that two or more contraventions have common elements that should be taken into account in considering what is an appropriate penalty in all the circumstances for each contravention or course of conduct. In that respect it is open to the Court to group separate contraventions together where those various contraventions may be said to overlap with each other and involve potential punishment of the respondents for the same or similar conduct.
d)The Court should consider an appropriate penalty to impose in respect of each contravention having regard to all of the circumstances of the case.
e)Having fixed an appropriate penalty for each contravention, the Courts should take the final look at the aggregate penalty to determine whether it is an appropriate response to the conduct which lead to the contravention. The Court should apply an “instinctive synthesis” in making that assessment.
The applicant contends, and the second respondent appears to agree, that the second respondent has admitted to a combined total of eleven contraventions of Items 2(1) and 5 of Schedule 16 of the Transitional Act and ss.45, 536 and 712(3) of the Fair Work Act in respect of the employees.
In my view, however, that is not so. Each contravention must be identified separately and insofar as there has been a failure by the first respondent to pay each of the employees their entitlements under a relevant industrial instrument, there is a contravention. Thus, in respect of each of the 27 employees there is a contravention of the relevant industrial instrument (and legislative provision) each time the first respondent failed to pay to that employee the appropriate and correct basic rate of pay, any casual loading, and any other loadings payable pursuant to that instrument. It is impossible to tell upon the evidence before the Court or the submissions made by the parties just how many contraventions are involved in this case.
In my view, the approach adopted by the applicant (and accepted by the second respondent) to treat the failure to pay each of the subject employees the basic periodic rates of pay for their classification during December, 2009 (for example) as a single contravention is flawed. In respect of each employee there is a contravention each time the first respondent failed to pay that employee his or her entitlements pursuant to the industrial instruments. Such an approach is consistent with authority: see for example McIver v Healey [2008] FCA 425, Gibbs v Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216: Fair Work Ombudsman v Praglowski [2010] FMCA 621 at [49]; Seymour v Stawell Timber Industries Pty Ltd (1985) 9 FCR 241 at 266-267 per Gray J (with whom Northrop J agreed at 245. Fair Work Ombudsman v Security Protection Services Pty Ltd & Ors [2010] FMCA 252 at [24] – [38]; Fair Work Ombudsman v Kingsford Carwash Pty Ltd & Anor (No.2) [2012] FMCA 1210.
In my view, the relevant contraventions are as follows:
a)A failure to pay each of the employees (save for Mr Trinder), basic periodic rates of pay during December, 2009 for each pay period (breach of Item 5 of Schedule 16 of the Transitional Act) – more than, but at least a minimum of, 27 contraventions;
b)A failure to pay each of the employees (save for Mr Trinder) casual loadings for their classification during December, 2009 for each pay period (a breach of Item 5 of Schedule 16 of the Transitional Act) – more than, but at least a minimum of, 27 contraventions;
c)A failure to pay certain of the subject employees (save for Mr Trinder) overtime during December, 2009 (in contravention of Item 2(1) of Schedule 16 of the Transitional Act ) – at least a minimum of 4 contraventions according to the tables appended to the statement of agreed facts;
d)A failure to pay each of the subject employees their basic rates of pay for their relevant classification during January and February, 2010 for each pay period (in contravention of s.45 of the Fair Work Act) – more than, but at least a minimum of, 27 contraventions;
e)A failure to pay Mr Trinder his basic rate of pay (s.45 of the Fair Work Act) (at least 1 contravention);
f)A failure to pay each of the subject employees casual loadings where relevant for their classification during January and February, 2010 in breach of s.45 of the Fair Work Act for each pay period – more than, but at least a minimum of, 27 contraventions;
g)A failure to pay Mr Trinder his casual loading (in contravention of s.45 of the Fair Work Act) (no less than 1 contravention);
h)A failure to pay each of the relevant employees overtime where relevant during January and February, 2010 (in contravention of s.45 of the Fair Work Act) (at least 1 contravention);
i)A failure to pay Mr Trinder penalty rates for evening work allowances, Saturday penalty rates and Sunday penalty rates (in contravention of s.45 of the Fair Work Act) (no less than 1 contravention);
j)A failure to provide Mr Trinder with pay slips during the period of his employment in the form and including the information prescribed by the Regulations (ss.536(1) and 536(2) of the Fair Work Act) (no less than 2 contraventions);
k)To comply with the notice to produce either in the period required by the notice to produce or at all (a contravention of s.712(3) of the Fair Work Act) (1 contravention);
In my view, there are no less than 119 contraventions that have been admitted by the second respondent.
It is necessary to consider, however, whether the statutory aggregation provision in s.557(1) of the Fair Work Act applies. The section provides:
Course of conduct
(1) For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:
(a) the contraventions are committed by the same person; and
(b) the contraventions arose out of a course of conduct by the person.
Whilst s.557(2) of the Act refers to ss.45, 536(1) and 536(2) of the Act, it does not refer to schedule 16 of the Transitional Act. Thus, it can have no application to the breaches alleged against the first and second respondents to the extent that those breaches arise out of a failure to pay in accordance with the award based transitional instrument.
Moreover, in my view s.557(1) does not require the Court to treat the alleged contraventions of s.45 of the Fair Work Act (by failure to pay basic rates of pay for example) in respect of multiple employees, as one contravention. The failure to pay a basic rate of pay to one employee over time might properly be seen as a course of conduct. However, the failure to pay a basic rate of pay to a number of employees should not, in my view, be seen as a “course of conduct” for the purposes of s.557(1) unless it is the result of a single decision made by the employer. The failures to pay basic rates of pay to a number of different employees are several and separate courses of conduct in respect of each employee which is dependent upon the decision made in respect of that employee. So much seems to be accepted by the approach of Marshall J in McIver v Healey (above).
Thus, to the extent that in respect of each employee there has been a failure to pay basic rates of pay, or casual loading, or any other form of loading, I am content to treat those multiple contraventions as a single contravention of each of the relevant requirements in accordance with s.557(1), but it seems to me inappropriate to treat as one contravention, a failure to pay multiple employees the same type of entitlement.
The number of contraventions is therefore not reduced by an application of s.557(1) because the number determined by me is the minimum number of contraventions derived by treating each series of contraventions of a particular statutory entitlement in respect of an individual employee as one contravention. Unlike, for example Fair Work Ombudsman v Praglowski (above), there is no evidence that the employer’s conduct towards the employees is the result of a single decision to pay the employees the incorrect basic rate of pay.
There is a discretion to further aggregate the contraventions to the extent that two or more contraventions have common elements that should be taken into account in considering what is an appropriate penalty in all the circumstances for each contravention or course of conduct. It is open to the Court to group separate contraventions together where those various contraventions may be said to overlap with each other and involve potential punishment of the respondents for the same or similar conduct.
In Fair Work Ombudsman v Kensington Management Services Pty Ltd (No.2) [2012] FMCA 586, Smith FM discussed the basis upon which the statutory aggregation in s.557(1) applies, and how it should relate to the application of the additional sentencing discretion to further group contraventions that have some common elements:
16. …[The statutory aggregation] was explained by Gray J in Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216 at 223, where his Honour said:
The object of s.178(2) appears to be that a party bound by an award and pursuing a course of conduct involving repeated acts or omissions, which would ordinarily be regarded as giving rise to a series of separate breaches, should not be punished separately for each of those breaches. If such a party has pursued a course of conduct which gives rise to breaches of several different obligations, there is no reason why it should be treated as immune in respect of its breach of one obligation, merely because it has acted in breach of another.
17. These observations tend to suggest that normally it is appropriate to impose separate penalties for breaches of different entitlement provisions, even where they all ‘arose out of a course of conduct’ by the employer, in the sense that they all shared a common cause or background. Numerous judgments of this Court and the Federal Court have proceeded on that basis. They usually arrive at separate penalties for multiple failures to pay separate types of entitlements, and then address the possibility that the resultant penalties might, in aggregate, exceed an amount which is ‘just and appropriate’ in all the circumstances, by applying a ‘totality principle’ which might require further adjustment of the penalties (see Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 at [5]‑[9], [43]).
18. However, beyond the statutory aggregation of contraventions under s.719(2), and before applying the ‘totality principle’, the sentencing discretion also allows a further aggregation of penalties for groups of different contraventions forming part of one course of conduct. A discretion to do this has been said to arise:
“where a number of acts of a similar nature committed by one or more defendants were connected with one another, in the time and place of their commission or by their common purpose, in such a way that they could fairly be regarded as forming part of the same transaction or criminal enterprise” (see Construction, Forestry, Mining and Energy Union v Williams (2009) 262 ALR 417, [2009] FCAFC 171 at [15], quoting Lord Diplock in Director of Public Prosecutions v Merriman [1973] AC 584 at 607).
19. The mere presence of a ‘course of conduct’ for the purposes of the statutory aggregation of contraventions repeated over a period of time usually does not necessarily lead to a further aggregation under this principle, and there is a need to identify something which justifies it. The authorities clearly hold that the adoption of a further grouping or aggregation of penalties is discretionary (cf. Mornington Inn (supra) at [58]). In Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39, Middleton and Gordon JJ said:
[39] As the passages in Williams 262 ALR 417 explain, a “course of conduct” or the “one transaction principle” is not a concept peculiar to the industrial context. It is a concept which arises in the criminal context generally and one which may be relevant to the proper exercise of the sentencing discretion. The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality. That requires careful identification of what is “the same criminality” and that is necessarily a factually specific enquiry. Bare identity of motive for commission of separate offences will seldom suffice to establish the same criminality in separate and distinct offending acts or omissions.
Some of the contraventions have common elements. There is no doubt that that should be taken into account when considering an appropriate penalty to ensure that the second respondent is not punished more than once for the same or substantially similar conduct. To the extent that there is commonality or overlap between contraventions, it is possible to take into account the substance of the matter “by imposing no penalty, or a nominal penalty, in respect of breaches of some terms, but a substantial penalty in respect of others”: per Gray J in Gibbs v Mayor, Councillors and Citizens of the City of Altona (above) at 223; see also Kelly v Fitzpatrick [2007] 166 IR 14 at 17.
Having regard to the commonality between the contraventions, the applicant submits that the contraventions fall into six groups namely:
a)A failure to pay the basic rate of pay derived from the retail award during December 2009 and the modern award during January 2010 – February 2010 and for Mr Trinder later in 2010;
b)Failure to pay casual loading for the employees derived from the retail award during December 2009 and the modern award during January 2010 – February 2010 and later in 2010 for Mr Trinder;
c)Failure to pay overtime for the employees as prescribed by the retail award and modern award;
d)Failure to pay penalty rates for Mr Trinder as prescribed by the modern award;
e)Failure to provide pay slips for Mr Trinder; and
f)Failure to comply with the notice to produce.
Although I have some misgivings about grouping the contraventions in that way, and thereby treating as one contravention multiple contraventions that range over a number of employees and time periods, I will adopt that grouping in deference to the agreement reached between the parties. Moreover, by so grouping the contraventions each distinct type of contravention is given some recognition, and those contraventions which bear some commonality are treated together so that issues of any overlap in the circumstances of the contraventions are taken into account.
Section 546(2) of the Fair Work Act and Item 16 of Schedule 16 of the Transitional Act (which provides that the civil remedy provisions of the Fair Work Act applies for the relevant breaches) proscribes the maximum penalty that may be imposed by this Court by each relevant breach of the Fair Work Act (other than s.526(2) of the Fair Work Act) and the Transitional Act to be, in the case of an individual 60 penalty units. The maximum penalty that may be imposed by the Court for a breach of s.536(2) of the Fair Work Act in the case of an individual, is 30 penalty units.
A penalty unit is equivalent to $110. Therefore, the maximum penalty that may be imposed by the Court on Mr Murphy for each contravention of the Fair Work Act (save s.536(2)) is $6600. In respect of the breach of s.536(2) the maximum is $3300.
Given the groups of contraventions identified above, the maximum penalty in this application that might be imposed upon Mr Murphy is $36,300. The parties agree that a penalty in the range of 30 – 40% of the maximum penalty ($10,890) would be an appropriate response to the second respondent’s conduct. The applicant then recommends that in recognition of the voluntary rectification payments made by the second respondent, that the penalty to be imposed be reduced to reflect that and be in the range of $6000 - $8000.
As I pointed out in Fair Work Ombudsman v Bedington [2012] FMCA 1133 (at 44 – 45), the Court bears ultimate responsibility for the penalty to be imposed in any particular case. It is not bound by the parties’ agreement and must consider for itself what constitutes an appropriate penalty. However, the determination of an appropriate penalty is not an exact science and, within a permissible range a particular figure is not necessarily more appropriate than another. Promoting settlement of litigation is in the public interest and where the parties agree on facts and penalty those matters are matters which will weigh heavily on the Court’s determination. The Court should not reject a jointly proposed penalty simply because the Court might have chosen a different figure: it is sufficient if the jointly proposed penalty is “within the permissible range” or “broadly speaking” within that range.
Consideration of penalty
The applicant became aware of the first respondent’s conduct in this matter when complaints were made by two employees in April, 2010 and a further employee made a complaint in November, 2010. I accept that the breaches in this matter represent a failure to provide basic and important entitlements under the workplace relations legislation. The purpose of the legislation is to provide a safety net which ensures adequate minimum entitlements to employees, particularly those who are vulnerable or in low income roles. The legislation is also designed to provide an even playing field for all employers with regard to employment costs. A contravention of these fundamental entitlements undermines the workplace regime as a whole, and displays a disregard for the respondents’ statutory obligations.
The first respondent’s conduct in breach of the Transitional Act and the Fair Work Act and the second respondent’s involvement in that conduct spanned a period of 3 months from the beginning of December, 2009 until the end of February, 2010. It also occurred over a period of about 4 weeks in respect of Mr Trinder’s employment in September and October, 2010.
In total, the employees were underpaid a total amount of $18,201.65. Only three employees have received anything from the first or second respondents in respect of the underpaid amounts. The payments to those employees total $4,750 – less than a quarter of the total underpayment. Otherwise, neither the first nor the second respondent has made any attempt to rectify the underpaid amounts notwithstanding that the first respondent has had the benefit of those amounts.
There is no dispute that the second respondent has ultimate control of and directed the first respondent’s operations. The statement of agreed facts suggests that the second respondent relied upon his general manager for the conduct of the day to day business. In my view, however, that is of little significance because as the controlling mind of the first respondent, it was the second respondent’s responsibility to ensure that the relevant obligations were met. That he delegated those obligations to another and that other failed to discharge those obligations is no answer in these proceedings.
The applicant asserts in its submissions that 90% of the first respondents’ employees were young or from non-English speaking backgrounds. It suggests that given those matters the Court should find that the employees were “vulnerable.” Moreover, it is suggested that there is nothing to suggest that the employees were “particularly well versed in industrial and employment matters or the exercise of their rights under relevant industrial instruments.”
There is no evidence before the Court to suggest that 90% of the first respondents’ employees were young or from non-English speaking backgrounds. Moreover, there is nothing in the material to suggest that the fact that some of the employees were young or from non-English speaking backgrounds put them at any particular disadvantage in this case. For example, there was no suggestion that any of the employees had a particularly poor grasp of the English language. Moreover, it is not to the point to suggest that the employees were not well versed in industrial and employment matters. The respondents in this case is taken to have knowledge of the relevant laws. If the respondents are taken to have relevant knowledge of the law, then so to must the employees. In my view, it is simply a neutral factor.
I am satisfied by the material that the respondents did not deliberately set out to contravene the Fair Work Act or the Transitional Act but I accept that the second respondent by his actions has demonstrated at least a reckless disregard for the first respondent’s statutory obligations. Moreover, when the applicant brought the obligation to pay the relevant rates of pay and other entitlements to the attention of the first respondent by way of correspondence on 5 October 2010, 21 October 2010, 24 October 2010, 4 February 2011, 22 February 2011 and 24 March 2011 the first respondent and second respondent did nothing. I accept the submission that the fact that the respondents have done nothing since the matter was brought to their attention in 5 October, 2010 to rectify the situation is important.
The applicant suggests that after the relevant complaints were made, an investigation was instituted and carried out in respect of the first respondent’s business. It is suggested in submissions that the respondents “partially cooperated with the applicant’s investigations” .Documents were produced by the respondents to the applicant on 9 August, 2010 and 1 September, 2010. But apart from that, it is difficult to see in what other ways the respondents have cooperated with the applicant. In particular, the respondents did not:
a)respond in any meaningful fashion to the correspondence set out above (save for the provision of documents on 9 August, 2010 and 1 September, 2010);
b)provide any documents in relation to a notice to produce given by the applicant to the respondents in respect of Mr Trinder’s complaint;
c)rectify the contraventions despite being told of them;
d)participate in a record of interview; or
e)conduct themselves in these proceedings in a timely way.
In respect of the last matter the proceedings were filed on 22 December, 2011. Service of the application and statement of claim on the second respondent proved difficult and it was necessary for the applicant to secure an order for substituted service upon him. That order was made on 2 February, 2012. On 23 February, 2012 the Court made directions for the filing of a statement of agreed facts and for the filing and service of evidentiary material by each party. The matter was set down for penalty hearing on 10 May, 2012. On 6 May, 2012 the second respondent applied for an order that the penalty hearing be vacated, that the second respondent file and serve a defence in accordance with the Federal Magistrates Court Rules 2001, that the applicant file a reply, the proceedings be the subject of mediation and that the matter be adjourned to a date to be fixed. The second respondent, it seems, had changed his mind about admitting the contraventions alleged against the first and second respondents.
On 10 May, 2012 the Court ordered that the penalty hearing listed for that day be vacated and that the second respondent file a defence in accordance with the Rules, the applicant file a reply and the matter be referred for mediation. The second respondent filed the defence on 24 May, 2012 wherein he seemed to take the position where he neither admitted nor denied the allegations by the applicant in respect of the alleged contraventions. When the matter returned to Court on 11 July, 2012 the Court was informed that the matter was to proceed by way of penalty hearing and the Court made directions about the filing and service of submissions by each of the parties in respect of penalty.
In those circumstances, it could hardly be said that the second respondent has fully cooperated with the applicant in relation to these proceedings. The record reveals that the second respondent had changed his approach to the case at least twice and although ultimately the matter proceeded by way of penalty hearing on agreed facts, it was not before the second respondent put the applicant to the trouble and expense of considering an application by him to vacate a penalty hearing date and a defence to the contravention application.
I am not satisfied on the material before me (and there is no sworn affidavit material from the second respondent) that the second respondent has any contrition in respect of these contraventions. I am not satisfied that the second respondent has “considerably shortened and assisted the litigation process and reduced the cost to the public purse by admitting liability and entering into the statement of agreed facts.”
In the context of a discount to be applied to a penalty for an acceptance of liability and the giving of cooperation with investigative authorities, it was remarked in Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70 (at 74 – 76) that:
“… the benefit of such a discount should be reserved for cases where it can be fairly said that an admission of liability:
(a) has indicated an acceptance of wrongdoing and a suitable and credible expression of regret; and/or
(b) has indicated a willingness to facilitate the course of justice.”
As was pointed out in that case, a discount is not available simply because the respondent has spared the community the cost of a contested trial.
I do not tend to apply any discount to the penalty in this case. I am not satisfied that the evidence indicates an acceptance of wrongdoing and a suitable and credible expression of regret. In my view it does not indicate a willingness to facilitate the course of justice.
There is precious little evidence before me about the circumstances of each of the relevant employees. What there is comes from the statement of agreed facts and it is limited. However, much as in McIver v Healey (above), the employees here appear to have been employed on a flat rate in breach of the relevant industrial instruments. The offending conduct was the payment of a rate below the award rate. Unlike McIver v Healy the failure to pay appropriate loadings and allowances does not seem to have been a consequence of the fixing of an incorrect rate for each employee.
There is no evidence of any prior contraventions of the Act.
Some limited rectification has been undertaken by the first and/or second respondents. There has been some limited cooperation that the second respondent has afforded the applicant and the Court.
It seems to me that an appropriate penalty in respect of the contraventions to pay the basic rates of pay in respect of each of the 28 employees should be fixed at 40% of the maximum namely $2,640.00. A similar penalty should be imposed in respect of the contraventions relating to casual loading, overtime ad the failure to pay Mr Trinder penalty rates ($2,640.00 for each group of contraventions).
In respect of the breach of s.536(1)(ii) a penalty of 40% of the maximum is appropriate. It is necessary to mark the Court’s disapproval of the second respondent’s failure to provide Mr Trinder with the documents that he is otherwise entitled to receive. Pay slips and the information contained on them are important. No explanation has been proffered by the second respondent as to his failure or the first respondent’s failure in that regard. In respect of that contraventions the penalty will be $1,320.
Finally, in respect of the breach of s.712(3) I propose to impose a penalty of 50% of the maximum ($3,300). The failure to comply with a notice properly issued by the applicant in the course of its investigations and the discharge of its statutory functions is serious. Recipients of such notices should be left under no misapprehension about their obligations to comply with those notices.
Total penalties
The aggregate of the penalties I have imposed is $15,180. The issue is to determine whether that figure is out of proportion to the overall conduct of the second respondent as described in Australian Ophthalmic Suppliers Pty Ltd v McAlary-Smith [2008] FCAFC 8 at [23] and [71]. Does the proposed penalty provide an appropriate response to the conduct which lead to the breaches?
The conduct in this case took place over the course of 3 months in the case of at least 27 employees and 1 month in the case of Mr Trinder. It resulted in underpayments to the relevant employees of $18,201.65. There is no evidence to explain how the breaches occurred other than what is in the agreed statement of facts, namely that the second respondent relied upon his general manager.
The lack of any explanation from the second respondent as to the contraventions and how they occurred is concerning. The need for general deterrence is plain. For the reasons given above, no discount ought be applied to take account of any contrition or cooperation. There is no evidence that a penalty of that order would be crushing for the second respondent.
In all of the circumstances the orders will be as set out at the commencement of these reasons.
I certify that the preceding fifty-five paragraphs are a true copy of the reasons for judgment of Judge Jarrett
Associate:
Date: 7 May 2013
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