Fair Work Ombudsman v Waterfall Feedlot

[2017] FCCA 879

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v WATERFALL FEEDLOT & ANOR [2017] FCCA 879

Catchwords:
INDUSTRIAL LAW – Awards – breach of award – contravention of FW Act – breach admitted –pecuniary penalty – penalty to be paid to the Commonwealth.

Legislation:

Fair Work Act 2009 (Cth): ss.44, 45, 550, 545, 546

Cases cited:
Mason & Harrington Corporation Pty Ltd t/as Pangea Restaurant & Bar [2007] FMCA 7

Applicant: FAIR WORK OMBUDSMAN

First Respondent:	WATERFALL FEEDLOT PTY LTD ACN 110 862 452
Second Respondent:	ROBERT MAUDSLEY

File Number: BRG 836 of 2016

Judgment of: Judge Vasta

Hearing date: 21 April 2017

Date of Last Submission: 21 April 2017

Delivered at: Brisbane

Delivered on: 21 April 2017

REPRESENTATION

Counsel for the Applicant: Mr Brigden

Solicitors for the Applicant: Fair Work Ombudsman

Counsel for the Respondent: Mr Massy

Solicitors for the Respondent: McCullough Robertson Lawyers

ORDERS

THE COURT DECLARES:

1. That the First Respondent contravened the following civil remedy provisions of the FW Act:

   (a)section 44 of the FW Act by failing to pay annual leave upon termination in accordance with section 90(2) of the FW Act;

   (b)section 45 of the FW Act by:

   (i)failing to pay minimum wages as required by clause 28.1 of the Modern Award;

   (ii)failing to pay casual loading as required by clauses 10.4 and A.5.4 of the Modern Award;

   (iii)failing to pay Monday to Saturday and Sunday overtime rates as required by clause 31.2 of the Modern Award;

   (iv)failing to pay public holiday penalty rates as required by clauses 32 and A.6.4 of the Modern Award; and

   (v)failing to ensure employee access to the Modern Award as required by clause 5 of the Modern Award.

2. That the Second Respondent was involved in the First Respondent’s contraventions alleged in paragraphs 1 (a) to 1(b)(iv) above and is taken to have committed those contraventions pursuant to section 550(1) of the FW Act.

THE COURT ORDERS:

1. That pursuant to section 546(1) of the FW Act that, within 120 days, the First Respondent pay pecuniary penalties fixed in the sum of $110,000.00 (inclusive of GST) for its contraventions set out in paragraph 1 above.

2. That pursuant to section 546(1) of the FW Act that, within 120 days, the Second Respondent pay pecuniary fixed in the sum of $20,000.00 for his involvement in the contraventions set out in paragraphs 1(a) to 1(b)(iv) above.

3. That pursuant to section 546(3)(a) of the FW Act that any penalties imposed on the Respondents be paid to the Commonwealth.

4. That pursuant to section 545(1) of the FW Act that, within 28 days, the First Respondent provide to the Applicant evidence of compliance with clause 5 of the Modern Award in the form of a written statement executed by an officer of the First Respondent certifying that:

   (a)the Modern Award has been made available to the First Respondent’s current employees on a noticeboard which is conveniently located at or near the workplace, or through electronic means; and

   (b)detailing the method(s) by which the Modern Award has been made available.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 836 of 2016

FAIR WORK OMBUDSMAN

Applicant

And

WATERFALL FEEDLOT PTY LTD ACN 110 862 452

First Respondent

ROBERT MAUDSLEY

Second Respondent

REASONS FOR JUDGMENT

(Ex tempore)

1. By application and statement of claim filed in this Court on 12 September 2016, the Applicant, Fair Work Ombudsman, has sought declarations and pecuniary penalties in relation to breaches of the Fair Work Act 2009 (Cth) (“the FW Act”) allegedly committed by Waterfall Feedlot Proprietary Limited and the Second Respondent, Mr Maudsley, who is, for all intents and purposes, the guiding force behind the company Waterfall Feedlot Proprietary Limited.

2. The facts, in short compass, are that the company Waterfall Feedlot is a family-owned business that operates feedlot services for cattle at or near the town of Goomeri in Queensland.  It has been operating for around 27 years at present. 

3. It is a customer feedlot in that what occurs is that graziers can take their cattle to a feedlot and have them all fed, given antibiotics, assessed, have sick cows separated from the rest of the herd, and so on, so that the cows are in the best condition they can be before they are given to the auction houses or the slaughter houses.

4. There are sometimes graziers who will simply deliver cattle to the feedlot for them all to be gotten into some sort of shape before they are then transferred to the grazier.

5. The loading and unloading of cattle has to be performed either early in the morning or later in the afternoon when the temperatures are cooler so as to ensure that the cattle have the least amount of heat stress.  The company employs about 20 workers from time to time, which include three truck drivers, three office workers and three employees at some farming operations.

6. The general duties of these persons who are employees are the proceeding of cattle, the injecting with antibiotics, the ear tagging of cattle for identification, the manoeuvring of cattle into holding pens for feeding, the observation of pens at all times of the day to check on the welfare of cattle and ensuring that ill and injured cattle are separated, that they are fed and they are loaded onto the trucks.

7. What was occurring in the 2014/2015 period was that there was a very busy time for the feedlot, but the feedlot was also competing with the mining sector for good workers.  The company became a good place for persons who were in Australia on working visas, most notably the 417 visas. This is because it would be work in an agricultural area and such work was always seen by the Department of Immigration to be of a certain value and completion of such work often led to the renewal of visas.

8. There were six persons who were on 417 visas who ended up being employed by this company during the period January 2014 to about September 2015 and around whom this application is centred.  Each of these persons ended up making complaints to the Fair Work Ombudsman alleging underpayments of their casual hourly rate of pay, overtime and penalty rates. 

9. The first complaint was received on 30 September 2015 and it would seem the last complaint was received on 21 March 2016. 

10. The six persons had no prior experience working in the feedlot industry and, at the time for which they were employed by the First Respondent, they resided at the premises of the First Respondent at 18 Maudsley Road at Goomeri. 

11. What has become obvious is that most employees work on a roster of 10 days on and four days off.  The usual day would commence around 6:00am each day.  There would be a break for an hour and there could be a knockoff at any time from 5:00pm until 7:00pm.

12. What the Respondent company did was pay each employee a flat rate of pay of $17.00 per hour for all hours worked during this period. I should say, there is some controversy about this, but it does not really affect matters, but the Second Respondent, Mr Maudsley, said that he has had a conversation with all six of these people.  As the requirements of a 417 visa meant that the employees would have to work 88 days to satisfy all the requirements of the visa, these six were happy to work the 88 days with no breaks or very little breaks, and they were working, during that period of work, 11 to 14 hours a day.

13. This meant that they were able to both leave the employee over a quicker period and to renew their visas.  So in many ways one would think that this was an arrangement that was very useful to the employer and to the employee. 

14. The employer did allow the persons to live in one of two houses that were on the property, which did have the basic amenities provided.  However, the persons did have to buy their own food from the local town, and there was a car that they were allowed to use, though it would seem each person was only allowed to use that car once a week for those purposes of going into the town.

15. As I have previously said, the Respondent paid each employee the flat rate of $17.00 an hour, except for one of the employees, who, from 2 July to 9 September, was paid $17.30.00 per hour as a flat rate, and the employees were paid $34.00 an hour for work performed on public holidays, and I will say something a little bit more about that a little later.  The employees were paid on a fortnightly basis.

16. The fact is that the First Respondent was required to comply with the FW Act in respect of the employment of employees. There was a modern award that covered the First Respondent in relation to the employment of these employees, and it applied to them. The modern award was such that three of the employees were classified at a level called FLH1, and the other three were classified at FLH2, though it seems those three had graduated from FLH1 to FLH2.

17. The award for FLH2, was $17.35 an hour from 1 July 2014, and then $17.79 per hour from 1 July 2015.  The ordinary hours for farm and livestock hands are 38 hours a week in a four-week period, or 152 hours in any period of four consecutive weeks. 

18. The base rate of FLH1 is not discernible on the material before me but it has been conceded that it was actually under the flat rate of $17.00 an hour.  However, the modern award made provision for casual loading to be paid.  It made provision for overtime rates to be paid.  It made provision for there to be Sunday overtime, which is different to the Monday to Saturday overtime, and the award made provision for public holiday penalty rates.  The modern award also made provision for annual leave entitlements to be paid upon termination. 

19. As each of the persons were paid that flat rate, none of those other entitlements were paid. 

20. As well as that, the company was required to ensure that copies of the modern award were available to all of the employees, either on a noticeboard which was conveniently located at or near the workplace or through electronic means.  No copy of the modern award was made available to the employees at all. As a result of this, it was some time after the employment that these persons actually realised that they had been underpaid.

21. I have been very helpfully provided with a table from the Fair Work Ombudsman which detailed each of the underpayments per employee.  The total of the underpayments was $38,254.58.  When one averages that out, it is a figure of about $6,400.00 on average for each of those persons.

22. Whilst one may say that such an amount is not a great amount in the scheme of things, when one looks at these payments, in context, one can see with regard to Mr Tiffany, that he was entitled to have been paid $14,979.04 but was underpaid $7,678.22. 

23. That meant that he was underpaid 51.26 percent of what he should have been paid.  Mr McLaughlin was underpaid 34.9 percent of what he should have been paid, Mr Sparwood underpaid 48.31 percent of what he should have been paid, Mr Murphy underpaid 39.65 percent of what he should have been paid, Ms Goodge underpaid 38.97 percent of what she should have been paid, and Mr Cookson, he was the smallest, but he was still underpaid 28.19 percent of what he should have.

24. So whilst the sums may average out to about $6,400.00 a person, when one puts it in its proper context, there are not many people who would not feel hardship being deprived of no less than 28 percent of what they were lawfully entitled to be paid. 

25. So whilst one may look at the total amount of money and say that it is not the most heinous and significant amount that has ever come before this Court, when one looks at those percentages and puts it into proper perspective, it does show that these workers have been well and truly affected by their employer.

26. This matter has proceeded straight to a penalty hearing.  The amount of $38,254.58 was paid by the First Respondent on 18 May 2016, which was before the institution of these proceedings.  So there has been very good cooperation with the administration of justice, and timely rectification of the breaches that have occurred. 

27. The Second Respondent, Mr Maudsley, also admitted his accessorial liability in a timely way.  That level of cooperation is something that I ought take into account. 

28. Whilst it may be said that the case by the Applicant against the two Respondents was very strong and it was inevitable as to what the conclusion would have been, nevertheless it is a matter that the Court needs to take true notice of and I do intend to do that. 

29. The only troubling matter about that, were some matters that were contained in the affidavit of Mr Maudsley as if in some way to try and excuse the reprehensible behaviour that he had undertaken.  He says this at paragraph 32:

    “32. Because of the way that Waterfall Feedlot operates as a seven day a week, 365 day a year operation, there is always work to be performed.  The employees understood that because there was always work to be performed, they could voluntarily work their 88 days in one continuous block so as to finish the amount of time required to qualify for the second year of their visa and leave Waterfall Feedlot to continue their holiday.

    33. Because the employees wanted to voluntarily work the hours described above, as opposed to the usual 10-4 roster, I thought that Waterfall Feedlot did not have to pay the usual over time and penalty rates associated with the work they performed.  I thought that because Waterfall Feedlot did not direct the employees to work the additional hours, Waterfall Feedlot did not have to pay the associated overtime and penalty rates.  Because of the unusual arrangement I also did not think the workers were entitled to receive accrued annual leave and leave loadings upon completion of their work periods.”

30. Mr Massy, in the best traditions of the Bar, has attempted to convince me of the veracity of that statement and how it should be factored into my decision as to what are the appropriate pecuniary penalties. 

31. Despite those valiant efforts, I do not accept that for one second.  It is a statement that makes absolutely no sense at all and in some ways serves to somewhat undo the extremely good level of cooperation with the administration of justice.

32. The statement that:

    “I thought that Waterfall Feedlot did not have to pay the usual overtime and penalty rates associated with the work they performed…”

    becomes a nonsense when one considers that he did actually pay double the time on public holidays, going from $17.00 an hour flat rate to $34.00 an hour flat rate. One cannot, as it were, say that “that fits in with a statement that he thought he did not have to pay the overtime and penalty rates” when he actually did do that, but did it on a flat rate of $17.00 an hour.

33. If he truly did not believe that he needed to pay the penalty rates, then the real question is “why did he?”.  Well, some may say that it was out of the goodness of his heart, but his conduct does not display at all that Mr Maudsley does anything out of the goodness of his heart, but simply what is best for his business. 

34. It was of great concern to me that these persons were persons who were under 417 visas.  They have been treated quite differently to how other Australian citizens have been treated, and I will expand on that.

35. I also do not accept this statement because it is obvious on the material that there have been other times that persons have made complaints.  On those occasions, the Fair Work Ombudsman has intervened and informed Mr Maudsley as to what the correct regime as far as payments are actually concerned.  He has been sent links to these areas that he can look things up and he has spoken to the Fair Work information line in the past. 

36. It seems as though this was a case where he simply did not want to know what the proper arrangements were because it was in his best interests to get these workers at the cheapest rate. He reasoned that the workers seemed to be extremely happy to have an arrangement where they could complete their 88 days of work in such a short time and therefore there was no problem.

37. So apart from that aspect of the affidavit, it does show that there has been some contrition. 

38. What has happened since then is that the company has engaged very reputable solicitors who have ensured that there have been appropriate checks and balances put into place to ensure that there is compliance under the FW Act and that there will not be any repetition of these particular breaches. So it now falls on me to look at what are the appropriate penalties.

39. In doing so, I am mindful that this Court has compiled somewhat of a checklist in the case of Mason & Harrington Corporation Pty Ltd t/as Pangea Restaurant & Bar [2007] FMCA 7. However, those checklists should never be used as such. However, I am very mindful of all of the circumstances that have been identified by the Court and I do take them into consideration here.

40. What I see as the important aspects here are these; that the workers were given accommodation, so notwithstanding they were working very long hours and very hard work with no overtime, no penalty rates, they were at least accommodated and given the basics. 

41. However, this is somewhat of a double-edged sword.  If the workers are to work in the way that they were going to work, it would have been necessary for them to be very close to the farm in any event, otherwise these sorts of hours could not be accommodated.  It was still some distance to the nearest town and any other form of accommodation.  It was not walking distance, by any means, and the car had to be used, but it could only be used once a week. 

42. The workers were persons who are on working holidays and, in effect, wherever they lay their hat that is their home for the time being.  By accommodating them on the farm, it was far more conducive for them to be able to work because they had very little else to do; they were isolated from the rest of society with no phone lines and no internet access.  It was easy for them just to be there, work, go to sleep, and get up and work again. 

43. But, still, there is usually a provision for employers to charge for accommodation and board, not that this was done in this case. Even though food was not included, there was never any sum asked for, for the provision of the accommodation or for the provision of the car to go into town once a week.  It is a significant factor that I do take into consideration. 

44. I do take into consideration the size of the family business and I do take into consideration the corrective actions that have been taken.  I do take into account the cooperation.

45. However, it seems to me that there is a degree of deliberateness about this action.  The persons were persons here under 417 visas.  They were, obviously, persons who were somewhat desperate to stay in this country to do work as quickly as they could and then move on as part of their working holiday. 

46. Such persons are ripe for exploitation and in this case they most certainly have been exploited. Whilst they may have been well and truly eager to avail themselves of the opportunities given by the Respondent company and the Second Respondent, that did not abrogate the responsibility of the Respondent company to comply with the FW Act and to treat these persons as they would have treated any other person.

47. The statement made by Mr Maudsley that all other workers were paid according to the award shows that the Respondent knew what the award was and that there was no excuse for not treating people working under the 417 visa as he would have treated every other worker. 

48. It is a blight upon the industries of this country for employers to treat those people who are here on working visas differently to the persons who are citizens of this country. The FW Act is just that. Everyone who is covered under the FW Act must be treated fairly.

49. For this reason, specific and general deterrence is absolutely paramount in the penalties and which I am now going to impose. Pursuant to s.557 of the FW Act, I have grouped the breaches into six different categories, five of which are shared between the company and Mr Maudsley personally, and the sixth one, which is the failure to make the award available, is a breach by the company alone. The maximum penalties for each of the breaches are $51,000.00, and for Mr Maudsley the maximum penalty for each of his five offences is $10,200.00, in other words, a maximum penalty of $306,000.00 for the company and $51,000.00 for Mr Maudsley.

1. Notwithstanding everything that has been said by Mr Massy in his submissions and the very helpful submissions of Ms Brigden, I have come to the conclusions that the penalties take into account the circumstances and the accommodation and all of those matters should be met with gross penalties in this order. 

2. For the failure to pay the minimum wage, for the company there should be a pecuniary penalty of $12,000.00, and for Mr Maudsley personally $3,000.00. 

3. For the failure to pay casual loading, there should be a penalty of $30,000.00, and for Mr Maudsley $6,000.00.

4. For the failure to pay overtime, there should be a penalty to the company of $40,000.00, and to Mr Maudsley personally $8,000.00. 

5. For the failure to pay public holiday penalty rates, there should be a penalty of $12,000.00 for the company, and $2,000.00 for Mr Maudsley personally. 

6. For the failure to pay annual leave entitlements, there should be a penalty of $30,000.00 for the company, and $6,000.00 for Mr Maudsley personally. 

7. For the failure to make the award available, there should be a penalty of $15,000.00 on the company.

8. That means that the gross amount for the company would be $139,000.00, and for Mr Maudsley $25,000.00. 

9. For all of the other matters that I have spoken of with regard to cooperation, a discount of 20 percent and a rounding up will be applied. 

10. That would mean that the penalty for the company is reduced to a figure of $110,000.00, and for Mr Maudsley personally $20,000.00. 

11. I decline to make an order pursuant to paragraphs 113 to 115 of the statement of claim, for this reason;  that it is the first offence and I take that there has been the obligations of an employer explained to the First Respondent and the Second Respondent by the very reputable solicitors who have come on board. 

12. If there is a repeat of this behaviour, well, obviously, there will be consequences.  But until that happens, I do not feel as though the Court should sanction the Respondents any more than it has.  The pecuniary penalties are not insubstantial.

I certify that the preceding sixty-one (61) paragraphs are a true copy of the reasons for judgment of Judge Vasta

Date:24 May 2017