Fair Work Ombudsman v Waechter and Anor

[2020] FCCA 1367

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v WAECHTER & ANOR [2020] FCCA 1367

Catchwords:
INDUSTRIAL LAW – Penalty hearing – contraventions of the Fair Work Act 2009 and the Restaurant Industry Award 2001 – penalties imposed.

Legislation:

Fair Work Act 2009 (Cth), ss.44, 45, 323, 536, 550, 557 and 712

Fair Work Regulations 2009 (Cth), reg.3.46.

Federal Circuit Court Rules 2001, r.13.03B(2)(c)

Restaurant Industry Award 2001, cls.13, 20 30, 33,34

Cases cited:

Kelly v Fitzpatrick [2007] FCA 1080

Applicant: FAIR WORK OMBUDSMAN

First Respondent: OYA WAECHTER

Second Respondent: PETER WAECHTER

File Number: LNG 31 of 2017

Judgment of: Judge Riethmuller

Hearing date: 12 December 2019

Date of Last Submission: 12 December 2019

Delivered at: Melbourne

Delivered on: 29 May 2020

REPRESENTATION

Counsel for the Applicant: Mr Tracey

Solicitors for the Applicant: Office of the Fair Work Ombudsman

The First and Second Respondents did not appear.

ORDERS

1. The First Respondent pay a total penalty of $78,000.00 pursuant to subsection 546(1) of the Fair Work Act 2009 (Cth), (‘the Act’) for her contraventions set out in the Orders of 17 July 2017.

2. The Second Respondent pay a total penalty of $22,000.00 pursuant to subsection 546(1) of the Act for his involvement in the contraventions set out in the Orders of 17 July 2017.

3. Pursuant to subsection 546(3)(a) of the Act, the First Respondent and Second Respondent pay their respective penalty amounts to the Consolidated Revenue Fund of the Commonwealth within 60 days of the Court's order.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

LNG 31 of 2017

FAIR WORK OMBUDSMAN

Applicant

And

OYA WAECHTER

First Respondent

PETER WAECHTER

Second Respondent

REASONS FOR JUDGMENT

1. The Fair Work Ombudsman (‘the FWO’) seeks the imposition of penalties on the first and second respondents (‘the respondents’) for breaching the Fair Work Act 2009 (Cth) (‘the Act’) and the Restaurant Industry Award 2001 (‘the Award’). The first respondent, Ms Oya Waechter was the owner and operator of Anatolia Restaurant, a Turkish style restaurant located in Hobart. The second respondent, Mr Peter Waechter is the first respondent’s husband and assisted his wife in the running of the restaurant.

Fair Work Ombudsman Investigation

1. In March 2016, following a request for assistance from several employees, the FWO commenced an investigation into the respondents’ restaurant.  The investigation revealed significant underpayment to four employees, Mr N, Ms W, Mr S and Ms K over a period from 21 February 2015 until 10 June 2016. The total underpayment was $31,452.58. Significantly, the breaches even included some periods of no payment.

The employees

Mr N

1. Mr N is a citizen of Malaysia who arrived in Australia in December 2014 as the holder of a student visa with limited working rights. Mr N speaks Mandarin and English is his second language. Mr N’s studies were in the hospitality field.

2. Mr N commenced working for the respondent’s restaurant on 21 February 2015. His duties included “greeting and seating customers, taking orders, serving food, cleaning and setting tables, receiving money and training less experienced staff members”. Mr N states he was required to work 7 days a week from 5.00pm to 10.00pm and that he often worked after 10.00pm.

3. Mr N was paid by cheque and cash, initially fortnightly, however this became monthly in around June 2015. Mr N was paid between $10.09 and $25.34 per hour for the period of 12 February 2015 to 15 November 2015. From 15 November 2015 to when his employment ceased, on 12 February 2016, Mr N was not paid at all.

4. The applicant submits that Mr N was underpaid a total of $24,800.01 which represents 55 per cent of his entitlements: see paragraph [39] of FWO’s submissions on penalty.

5. In his Affidavit, Mr N also outlines that his time working at the restaurant was “very distressing mentally”.  He was struggling to pay for both his living expenses and his tuition. He had to be frugal about his spending and was unable to socialise with friends. He had to apply for an instalment plan to pay his tuition and was under financial pressure. He feared he would not be able to continue his studies and would be forced to borrow money from his parents, or forced to leave Australia.

Ms W

1. Ms W is a mature woman of 61 years who was a casual employee of the restaurant from 27 May 2015 until 10 August 2015. She commenced a part time apprenticeship in commercial cookery on 11 August 2015, which continued until her employment ceased on 20 January 2016. Ms W was paid between $17.67 and $21.60 per hour during her employment and was not paid her annual leave entitlements.

2. The applicant submits the total underpayment to Ms W was $3,885.10, which represented an underpayment of 25 per cent of her entitlement: see paragraph [39] of FWO’s submissions on penalty.

Mr S

1. Mr S is a citizen of Pakistan who resides in Australia as the holder of a student visa, he is studying a Masters Degree in Applied Science. English is his second language. He arrived in Australia in April 2016, and commenced working for the respondents in May 2016. Mr S explains that his friend assisted him in his discussions with the first respondent about a job at their restaurant, as he had just arrived in Australia and his English was “not good at the time”.

2. Mr S worked as a kitchen hand and states that his duties included “washing dishes in the kitchen, cutting vegetables and preparing plates to be served to the customers”. Mr S worked two to three days a week, on four to six hour shifts until 11 June 2016 when his employment ceased. Mr S was paid $50.00 per week in cash, with a final payment of $100.00, making a total of $250.00. 

3. The applicant submits that the total underpayment to Mr S was $2,315.70 which represented 90 per cent of his entitlement during his employment.

4. In his Affidavit, Mr S submits that he was depressed during his employment. He states he was criticised for his appearance. He relied upon savings from home to meet his expenses of groceries, transport and rent and struggled as a result.

Ms K

1. Ms K was 15 years old when she commenced working at the restaurant, where she was employed as a junior casual employee from 27 May 2015 to 10 August 2015. Ms K was paid between $5.54 and $18.35 per hour.

2. The applicant submits the total underpayment to Ms K was $451.77, representing 25 per cent of her entitlement. Ms K is the only employee with respect to whom the underpayment has been rectified (by a payment made on 5 July 2018).

Procedural Background

1. The proceedings were commenced in this court by the FWO on 19 June 2017. Issues of service were addressed by Orders of the Registrar dated 3 August 2017, which deemed service on the solicitors who acted for the respondent during the FWO investigation to have been sufficient. A Notice of Address for Service was filed on 9 August 2017. A number of procedural Orders were then made for the filing of a defence and for the parties to attend mediation. No defence was filed and a mediation did not take place.

2. On 2 July 2018, the FWO filed an application seeking default judgment. On 17 July 2018, default judgment pursuant to r.13.03B(2)(c) of the Federal Circuit Court Rules 2001 was entered against the respondents. Judge McGuire made the following declarations in relation to the first respondent:

   a)The first respondent contravened s.45 of the Act by failing to pay Mr N, Ms W and Mr S the applicable minimum hourly rate for ordinary hours worked Monday to Friday as required by cl.20.1 of the Award;

   b)The first respondent contravened s.45 of the Act by failing to pay the minimum adult apprentice rate to Ms W, as required by sub-cl.20.2(d) of the Award;

   c)The first respondent contravened s.45 of the Act by failing to pay the minimum junior base rate of pay to Ms K as required by cl.20.3 of the Award;

   d)The first respondent contravention s.45 of the Act by failing to pay Mr N, Ms W, Ms K and Mr S a 25 per cent casual loading for all ordinary hours worked, as required by cl.13.1 of the Award;

   e)The first respondent contravened s.45 of the Act by failing to pay Mr N, Ms W and Ms K a penalty rate for all hours worked on a public holiday, as required by cl.34.1 of the Award;

   f)The first respondent contravened s.45 of the Act by failing to pay Mr N, Ms W, Ms K and Mr S a penalty rate for all hours worked on a Saturday, as required by cl.34.1 of the Award;

   g)The first respondent contravened s.45 of the Act by failing to pay Mr N, Ms W, and Mr S a penalty rate for all hours worked on a Sunday, as required by cl.34.1 of the Award;

   h)The first respondent contravened s.45 of the Act by failing to pay Mr N, Ms W, Ms K and Mr S as additional amount for work performed between the hours of 10.00pm to midnight on Monday to Friday, as required by sub-cl.34.2(a)(i) of the Award;

   i)The first respondent contravened s.45 of the Act by failing to pay Mr N an additional amount for work performed between the hours of midnight to 7.00am on Monday to Friday, including from midnight to Sunday as required by sub-cl.34.2(a)(ii) of the Award;

   j)The first respondent contravened s.45 of the Act by failing to pay Ms W minimum overtime rates for work performed in excess of agreed part-time hours, as required by cls.33.1 and 33.2 of the Award;

   k)The first respondent contravened s.45 of the Act by failing to pay Mr N, a casual employee, a minimum payment for two hours of work, as required by cl.13.2 of the Award;

   l)The first respondent contravened s.44(1) of the Act by failing to pay the accrued but untaken annual leave entitlements of Ms W on the termination of her employment, in accordance with s.90(2) of the Act;

   m)The first respondent contravened s.536(1) of the Act by failing to give Mr N and Mr S payslips within on day of paying an amount in relation to the performance of the work;

   n)The first respondent contravened s.536(2) of the Act by providing Mr N, Ms W and Ms K with pay slips that did not include information prescribed by reg.3.46 of the Fair Work Regulations 2009 (Cth);

   o)The first respondent contravened s.712(3) of the Act by failing to comply with Notices to Produce dated 17 May 2016;

   p)The first respondent contravened s.712(3) of the Act by failing to comply with Notices to Produce dated 27 September 2016;

   q)The first respondent contravened s.323(1) of the Act by failing to pay Mr N, Ms W and Mr S in full for work performed, at least monthly; and

   r)The first respondent contravened s.45 of the Act by failing to pay Mr N and Ms W the required amount of superannuation as required by cl.30.2 of the Award.

3. In relation to the second respondent, Judge McGuire made declarations that pursuant to s.550 of the Act the second respondent was involved in the following contraventions:

   a)Section 44(1) of the Act by failing to pay the accrued but untaken annual leave entitlements of Ms W, upon termination of her employment in accordance with s.90(2) of the Act;

   b)Section 536(1) of the Act by failing to give Mr N and Mr S payslips within on day of paying an amount in relation to the performance of the work;

   c)Section 536(2) of the Act by providing Mr N, Ms W and Ms K with pay slips that did not include information prescribed by reg.3.46 of the Fair Work Regulations 2009 (Cth); and

   d)Section 323(1) of the Act by failing to pay Mr N, Ms W and Mr S in full for work performed, at least monthly.

4. Most importantly, orders were made for the underpayments to be rectified within 28 days, including interest and superannuation, and for the respondents to undertake educational programs and register with the FWO’s portal. 

5. The matter was set down for a hearing on penalty with the parties to file submissions.

6. In May 2019, the respondents filed affidavit material and submissions in preparation for the penalty hearing. The matter came before the Court on 15 November 2019 in Hobart. At this hearing the solicitors for the respondents sought to withdraw from the proceedings, as the respondents had relocated to Germany to seek specialist medical treatment and the solicitors no longer held instructions. The matter was adjourned for the solicitors for the respondents to file the appropriate Notice of ceasing to act in order to ensure that the respondents were aware that their solicitors were no longer representing them. The matter was heard in Melbourne on 12 December 2019, at which time the respondents did not appear. Despite the respondents’ non-attendance at the hearing, I take into consideration the affidavits filed on their behalf and the written submissions on penalty that were filed.

Groupings

1. The contraventions outlined above result in 18 separate contraventions of the first respondent and 4 contraventions of the second respondent. It is accepted by the applicant that the legislation and authorities provide for contraventions arising out of the same course of conduct to be grouped together.

2. The FWO does not press a penalty with respect to the failure to pay Mr N evening penalty rates (at [17(i)] above) due to the low amount of the underpayment. The FWO submits that s.557(1) of the Act does not apply to the failures of the respondents to comply with the Notices to Produce (at [17(o) and (p)] above) and those contraventions cannot be grouped and must be treated as two separate contraventions.

3. The FWO accepts that contraventions with respect to the failure to pay minimum base rates of pay (at [17[(a), (b) and (c)] above) represent a common failure by the respondents to pay minimum requirements, and accordingly these contraventions should be grouped as a single contravention. As a result the FWO submits there are 15 separate contraventions of the first respondent, and 4 of the second respondent, resulting in a maximum penalty of $151,200.00 for the first respondent and $32,400 for the second respondent: see [30] and [34] of the FWO submissions on penalty.

4. The respondents submitted in their written submissions that these contraventions contain a common element of a failure to pay penalties and loading. As a result, the respondents submit there are 10 separate contraventions of the first respondent and 4 of the second respondent, resulting in a maximum penalty of $92,200.00 for the first respondent and $32,400.00 for the second respondent.

5. I do not accept this argument as the loadings arise under different parts of the Award.  It is appropriate for them to be grouped separately.  For example, it is a conceptually different matter, which arises under a different provision in the Award, to fail to pay a casual loading, compared to failing to pay public holiday rates. If the respondents’ argument were accepted, then effectively all contraventions would be grouped as one on the basis of a failure to pay full award entitlements, which could not possibly be the outcome intended by the legislature.

6. In relation to the second respondent, I accept the submissions of the parties. There are no groupings to be made.

7. Accordingly, the contraventions and maximum penalties for the first and second respondent are as follows:

Contravention	First Respondent	Second Respondent
Failure to pay hourly rates of pay in accordance with cl.20	$10,800
Failure to pay 25% casual loading in accordance with cl.13.1	$10,800
Failure to pay public holiday rates in accordance with cl.34.1	$10,800
Failure to pay Saturday rates in accordance with cl.34.1	$10,800
Failure to pay Sunday rates in accordance with cl.34.1	$10,800
Failure to pay evening rates (Mon to Fri) in accordance with cl.34.2(a)(i)	$10,800
Failure to pay overtime rates in accordance with cl.33.1 and 33.2	$10,800
Failure to pay minimum of 2 hours work in accordance with cl.13.2	$10,800
Failure to pay accrued untaken annual leave in accordance with s.90(2)	$10,800	$10,800
Failure to issue pay slips	$5,400	$5,400
Failure to issue pay slips with required information	$5,400	$5,400
Failure to comply with Notice to Produce dated 17 May 2016	$10,800
Failure to comply with Notice to Produce dated 27 September 2016	$10,800
Failure to pay in full for work performed	$10,800	$10,800
Failure to pay superannuation in accordance with cl.30.2	$10,800
Total	$151,200	$32,400

1. The FWO submits in all of the circumstances, a penalty in the mid-range would be appropriate and recommends a penalty within the range of $78,300.00 to $93,420.00 for the first respondent and a range of $12,528.00 and $15,100.00 for the second respondent.

2. The respondents submit they have no capacity to pay and given their health concerns, a penalty in the lower range would be more appropriate.

Relevant Considerations

1. There are a number of factors the Court should consider in determining an appropriate penalty, as referred to in Kelly v Fitzpatrick [2007] FCA 1080 (‘Kelly’s case’). I turn now to consider the relevant factor under the convenient headings provided for in Kelly’s case. I note however, that the list is not intended to be exhaustive, but a guide to assist in ensuring that relevant considerations are taken into account.

The nature and extent of the conduct which led to the breaches & the circumstances in which that conduct took place.

1. The breaches arise out of an underpayment to four employees working at the restaurant of the first and second respondents, totalling $31,452.38 over a period of 16 months. The FWO submits that there was no consistency to when or how employees were paid and it appeared “they were just paid whatever or whenever the First Respondent wished”: see paragraph [37] of FWO’s submissions. There was also periods of non-payment for two employees, a factor to which I give significant weight.

2. The respondents conduct in not providing payslips was a serious contravention of the Act, in that it left employees guessing about the employer’s compliance with their obligations and unable to easily obtain advice. This is no mere technical breach of the requirement to provide payslips, nor was there any readily available record elsewhere. The respondents have still not complied in full with the Notices to Produce. The failure to provide pay slips significantly disempowers employees.

3. The respondents made submissions around the circumstances surrounding the termination of Mr N’s employment, where it is alleged an altercation took place and that Mr N physically assaulted the first respondent.  I do not accept this allegation in circumstances where the respondents failed to attend for cross-examination.

4. The respondents have submitted throughout the proceedings that they have significant health and financial difficulties. The first respondent submits that in early 2015 the restaurant began experiencing financial difficulties and attempts were made to sell the business. The sale was unsuccessful and in December 2016, the restaurant ceased trading, leaving large debts including an Australian Tax Office debt of nearly $40,000.00: see paragraphs [8], [11] and [12] of the first respondent’s Affidavit sworn 19 March 2019. Whilst I accept that the business was not profitable, there is also a responsibility upon employers to cease operating a business if they cannot honour their commitments to staff and suppliers.  If they fail to do so they are simply using money due to others to prolong a failing business. With taxation debts of around $40,000.00 and such significant underpaid wages this circumstances appears more an aggravating feature than an ameliorating feature – effectively the respondents supported their failing business using wages they withheld without employee agreement and tax owing to the community to support community infrastructure such as hospitals and roads. Ultimately they failed to pay the employees. It is simply unacceptable to continue to trade using employees labour when a business is not able to pay wages.

1. The first respondent states (at paragraph [13]) that:

   I suffer from a history of significant medical complaints including diagnosed anxiety, depression, post-traumatic stress disorder, hypertension, diverticulitis, endometriosis and multiple sclerosis.

2. A number of medical reports are annexed. The first respondent also submits that during the time of the underpayments, she was attempting to run the restaurant whilst also caring for her husband and elderly mother, while managing her own health.  The second respondent has also filed an Affidavit attesting to his health concerns, including a diagnosis of skin cancer in 2017 and brain cancer in November 2016. I note these diagnosis post-date the period of underpayments.

3. It is submitted on behalf of the respondents, that their poor mental and physical health is a factor that:

   “has been causative and/or exacerbatory to the breaches… and subsequent failures to comply with the Court’s orders and Notices issued by the Applicant”: see [16] of respondents submissions.

4. Health issues are an important consideration, and often lead small business owners to difficult situations in their businesses.  However, it is not an adequate explanation for a period of 15 months of effectively exploiting employees.

Vulnerable nature of employees

1. The FWO submits that all four employees were vulnerable, and those vulnerabilities were exploited by the respondents. The FWO submits Mr N and Mr S’s status as international students, with English as a second language, who had only been in Australia for a short period of time resulted in them not knowing anything about their workplace rights or the obligations of employers under Australian legislation. Ms K was 15 years old, and Ms W was a mature age apprentice.

2. The respondents submit that they had their own vulnerabilities, both being migrants who spoke English as a second language and that they were “in no better place to determine and enforce rights under Australian law”. I do not accept that submission.  This is not a case simply about paying a sum a little less than the Award. The extent of the underpayments can only be seen as exploitation, even in the eyes of any reasonable person unaware of award entitlements.

The nature and extent of any loss or damage sustained as a result of the breaches.

1. The applicant submits that the underpayments represent a “significant” sum to the employees who were performing low-skilled, low paid work and were heavily reliant on minimum standards”: see paragraph [48] of the FWO submissions. It is hard not to accept this submission, as the nature of the breaches resulted in the employees receiving inconsistent pay and no payslips providing details. Further, Mr S was only paid 10 per cent of his entitlement during his employment.

2. Both Mr S and Mr N provided affidavits deposing to the financial difficulties they suffered in maintaining living expense while studying and the mental distress they experienced as a result of their employment at the restaurant.

3. The FWO submits (at paragraph [51]):

   51. The Court should mark the seriousness of the loss to and impact on the Employees in the penalty awarded by the Court.  The nature and extent of the loss suffered is significant and warrants the imposition of significant penalties because:

   (a) It involves contraventions of minimum standards of the most fundamental kind, which is the payment of wages and entitlements such as base rates, penalty rates and annual leave;

   (b) the contravening conduct in relation to each of the Employees only ceased upon the conclusions of their employment at Anatolia; and

   (c) the Respondent have been able to profit from the Underpayments over the past two years.

4. The FWO submits that the breaches relating to the failure to comply with the Notices to Produce should be taken as conduct by the respondents to hinder the ability of a full investigation, and warrant serous penalties.

5. The respondents submit that the Court should give limited consideration to the evidence of Mr N and Mr S, but did not challenge them by cross-examination in order to allow the court to form a view on their evidence.  I reject this claim.

6. The respondents claim “ignorance” in relation to the pay slip breaches and further submit they were unable to comply with the Notices due to their ailing physical and mental health.  It is a matter of basic respect to a person with whom one has a bargain for the provision of labour that there is some explanation of how the figure paid is struck.  In this case no records were ever produced showing calculations based upon hours or rates.  In a case where at least basic calculations were provided or methodology demonstrated to the employee, such an excuse may go some way to mitigating penalty.  However, in cases where nothing is provided to an employee to show how wages are struck (and the figure bears little correlation with hours worked) this does not rise to a mitigating factor.

Whether there had been similar previous conduct by the respondent.

1. There are no previous adverse findings of a Court against the respondents.

2. The FWO submits that in 2012 they had contact with the respondents following a complaint from a previous employer in circumstances similar to the breaches in this case, during which the respondents had the advice from the Tasmanian Chamber of Commerce: see paragraph [46] of FWO’s submissions. An informal meeting was held with the respondents and the matter resolved prior to any mediation: see paragraph [62] of Affidavit of Kate Elizabeth McIver.

3. The respondents submit the Court should not give this any weight and there is no evidence of any prior contraventions.  It remains relevant as it demonstrates that they would have been aware of the award system and the important obligations to employees under the system from that time onwards, and must have simply ignored their obligations.

Whether or not the breaches were deliberate.

1. The FWO submits that the breaches should be taken to be deliberate based on the following:

   a)they were put on notice of their obligations by the complaint in 2012;

   b)there were periods of non-payment which were raised with the respondents by the employees; and

   c)the first Notice to Produce was issued in May 2016 which was not complied with, and a second Notice to Produce was issued in September 2016.

2. The respondents submit that their actions should be considered “not as deliberate, but as careless and ignorant”: see paragraph [25] of respondent’s submissions. The respondents further submit that it was their physical and mental health issues, together with financial difficulties, which resulted in the breaches, rather than a deliberate attempt to underpay their employees or failure to comply with their obligations.

3. On the material before the court I am satisfied that the actions were deliberate.

Size of the Business.

1. The FWO submits that there is no evidence as to the size of the business, and rely on the principle that Court should impose a meaningful penalty, even in circumstances where no evidence in provided.

2. The respondents submit the restaurant was “a small family-run business”. The respondents submit they are suffering significant financial hardship and the restaurant ceased trading in 2016. The respondents submit that any penalty not within the low range would be crushing to the them. Whether this is true is unclear as they have fled the country to live in Germany.

Whether senior management was involved in the breaches.

1. The respondents accepts that each of the first and second respondent can be considered ‘senior management’ in their roles as owners and operators of the restaurant. The respondents submit, however that they should not be considered “experts or professionals” when considering their obligations and responsibilities under the legislative provisions.

2. Whilst neither respondent would be expected to have detailed knowledge of the Award requirements, neither can it be said that they made reasonable efforts to pay employees or comply with the Act requirements.

Whether the party committing the breach had expressed contrition and taken corrective action.

1. The respondents have rectified the payments in relation to Ms K in the amount of $451.77, however the FWO submits that 98 per cent of the underpayments remains outstanding. The FWO also notes that the respondents have not expressed any contrition or regret in relation to the breaches.

2. The respondents accept that they have not complied with the Orders of 17 July 2018 for the underpayments to be paid to the employees, and their submissions indicate that they will be unlikely to comply any time soon. The respondents no longer operate any business and submit that all their financial resources are utilised by treatment for their physical and mental health issues. The respondents submit that it should be taken into consideration that if they are ever in a position to rectify the payments, they would do so.

3. A failure to remedy any underpayments prior to the imposition of penalty must always be a significant aggravating factor. The most significant underlying purpose of the statutory scheme is to ensure that workers receive minimum entitlements for their labour.  This is crucial for the individuals who are usually the most vulnerable in the community, and for the fabric of Australian society as a whole by ensuring that a culture of exploitation does not grow.  It is disappointing that the applicant has not yet taken steps to attempt to enforce the judgement for outstanding employee entitlements in Germany.

Whether the party committing the breach had cooperated with the enforcement authorities.

1. The FWO submits there has been “a significant lack of co-operation on the part of the Respondents throughout the investigation and during these proceedings”: see paragraph [66] of FWO submissions. The respondents failed to fully comply with the first Notice to Produce, failed to respond at all to the second Notice to Produce, failed to provide documents they said they would and declined to participate in interview with the FWO.

2. The respondents have never filed a defence in these proceedings, they caused delay to the mediation process, which did not eventuate and caused  the FWO to seek default judgment. The FWO submits the respondents should not be entitled to any form of discount, as there has been no cooperation.

3. The respondents have also not participated in the penalty proceedings and have relocated to Germany.

4. The respondents submit that their failures to respond to the Notice and to attend Court dates should be considered in light of their mental and physical health.

The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements

1. The FWO submits that this fact should be given appropriate weight in determining penalty and the respondents have failed to adhere to minimum standards with vulnerable employees. The FWO submits the failure to pay superannuation has resulted in Mr N and Ms W being deprived of a fundamental protection. Ms W was also not paid her annual leave entitlement upon ceasing her employment.

2. The FWO also submits the failure to comply with the Notices to Produce hinders their process of investigation and enforcement.

Deterrence

1. The respondents submit there is a reduced need for specific deterrence as the respondents are unlikely to ever operate a business again.

2. While the FWO accepts that the respondents are no longer operating a business and given their health concerns, are unlikely to in the future, specific deterrence is still a relevant consideration in the circumstance of this case where there has been, “a complete lack of contrition and co-operation.” The FWO submits the contraventions were serious and deliberate and the respondents should be made aware that the Court does tolerate such breaches.

3. Both parties accept the need for general deterrence in imposing any penalty. The FWO submits the restaurant industry is particularly prone to complaints of underpayments of employees and penalty rates and the public should be left in no doubt that there is an obligation to comply with statutory obligations.

4. The respondents submit general deterrence has already been achieved within the Tasmanian hospitality community. This submissions  relies on significant media coverage on the issue, including reference to the penalties. The respondent’s reputations have been tarnished and the restaurant has closed.  In their submissions in reply, the FWO submits that any media release does not reduce the need for general deterrence. The FWO submits rather, the media provides a proper and effective tool for the FWO to act as regulator and provide information. The FWO also submits that the authorities suggest it is only when the media coverage is “inaccurate” or “adverse” that it becomes a mitigating factor, and that has not been alleged here.

5. Importantly, general deterrence is also served by ensuring that penalties demonstrate not only opprobrium for the conduct, but that there can be no suspicion of commercial benefit from failing to pay employees, and most importantly that a failure to rectify any underpayments before the assessment of penalty is a significant aggravating factor.

Conclusion

1. In this matter there has been significant exploitation of employees who for the most part, were never paid.  It is difficult to see any significant mitigating factors in the conduct of the respondents in their dealings with the employees. It does appear that they are now very unwell and had health problems at the time. Whilst their health concerns do not go directly to the conduct, it is nonetheless a factor that should be carefully considered.

2. I have determined that the appropriate penalties are $5,000.00 for each of the 10 specific Award underpayment breaches, $4,500 for each of the pay slip breaches $4,000.00 for each of the failures to produce documents, and $8,000.00 for each of the failure to pay in full and failure to pay superannuation. This comes to a total of $78,000.00 for the first respondent and $22,000.00 for the second respondent. Orders will be made accordingly.

I certify that the preceding seventy-three (73) paragraphs are a true copy of the reasons for judgment of Judge Riethmuller

Associate: 

Date: 29 May 2020