Fair Work Ombudsman v Wegra Investments Pty Ltd
[2012] FMCA 933
•15 October 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v WEGRA INVESTMENTS PTY LTD & ORS | [2012] FMCA 933 |
| INDUSTRIAL LAW – Workplace Relations Act – breaches of civil penalty provisions – sentencing principles – whether director of company knowingly involved if contraventions not deliberate. |
| Workplace Relations Act 1996 (Cth), ss.717, 719 & 728 Fair Work Act 2009 Crimes Act 1914 (Cth), s.4AA |
| Fair Work Ombudsman v Melland Pty Ltd & Anor [2012] FMCA 645 Fair Work Ombudsman v Roselands Fruit Market Pty Ltd & Anor [2010] FMCA 599 Yorke v Lucas [1985] HCA 65 Giorgianni v R [1985] HCA 29 Johnson & Youlden (1950) 1KB 544 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | WEGRA INVESTMENTS PTY LTD |
| Second Respondent: | HEINZ WEGENER |
| Third Respondent: | PAULA WEGENER |
| File Number: | ADG 364 of 2009 |
| Judgment of: | Lindsay FM |
| Hearing date: | 23 April 2012 |
| Date of Last Submission: | 23 April 2012 |
| Delivered at: | Adelaide |
| Delivered on: | 15 October 2012 |
REPRESENTATION
| Counsel for the Applicant: | Mr Hanus |
| Solicitors for the Applicant: | Piper Alderman |
| Counsel for the Respondents: | Mr Collett |
| Solicitors for the Respondents: | Johnston Withers |
ORDERS
That this Court doth declare pursuant to s.719(1) of the Workplace Relations Act 1996 (“WR Act”) that the first respondent contravened:
(a)Section 182(1) of the WR Act;
(b)Section 232(2) of the WR Act;
(c)Section 235(1) of the WR Act;
(d)Section 235(2) of the WR Act;
(e)Clause 6.5 of the Retail NAPSA;
(f)Clause 6.10 of the Retail NAPSA;
(g)Clause 6.11.1 of the Retail NAPSA;
(h)Clause 6.11.4 of the Retail NAPSA;
(i)Clause 7.6.5 of the Retail NAPSA;
(j)Clause 7.7.2(a) of the Retail NAPSA;
(k)Clause 7.1.6.1 of the Retail NAPSA;
(l)Clause 9.1.2 of the Agreement;
(m)Clause 9.1.3 of the Agreement;
(n)Clause 11.1 of the Agreement;
(o)Clause 13.3 of the Agreement;
(p)Clause 14.1 of the Agreement;
(q)Clause 6.2.2 of the Vehicle NAPSA;
(r)Clause 6.2.3 of the Vehicle NAPSA;
(s)Clause 6.5.1.1 of the Vehicle NAPSA;
(t)Clause 6.6.1.1 of the Vehicle NAPSA;
(u)Clause 6.7.1.1 of the Vehicle NAPSA;
(v)Clause 7.1.4.4 of the Vehicle NAPSA;
(w)Clause 8.1(iii) of the AWA;
(x)Clause 10.1 of the AWA; and
(y)Clause 17.1 of the AWA
That pursuant to s.719(1) of the Workplace Relations Act 1996 the following penalty be imposed upon the first respondent in respect of the contraventions referred to in order (1), namely a monetary penalty of $34,000.00.
That further consideration of the imposition of a penalty upon the second respondent be adjourned to 11 February 2013 at 9.30am.
That there be no order as to costs.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADG 364 of 2009
| FAIR WORK OMBUDSMAN |
Applicant
And
| WEGRA INVESTMENTS PTY LTD |
First Respondent
| HEINZ WEGENER |
Second Respondent
| PAULA WEGENER |
Third Respondent
REASONS FOR JUDGMENT
The applicant brought proceedings under the Workplace Relations Act 1996 (“the Act”) against the respondents on 23 December 2009.
No orders are now sought against the third respondent. The applicant continues to seek orders against the first and second respondent. The second respondent was a director and shareholder of the first respondent and is someone whom it is alleged was involved in the first respondent’s contraventions in the manner described in s.728 of the Act.
The application was subsequently amended (twice). The final form of the application is that which I received as Exhibit 1 at the penalty hearing on 23 April 2012.
The matter was ready to proceed to a penalty hearing at the hearing scheduled on 22 December 2011 but the Court could not accommodate the hearing on that day. The two years between the date of the filing of the application and that date constitute the period of time the parties had been in negotiation about the liability of the respondents. I am not surprised that the matter took as long to negotiate as it did. The legislative and instrumental schemes and the requirements of each of them in the context of the business conducted by the first respondent gave rise to complicated factual considerations.
The proceedings relate to a group of enterprises run by the respondents employing over the relevant period some 102 employees, 54 of whom were affected by one or more of the breaches of the Act and the relevant industrial instruments.
Originally the aggregate underpayments to all employees alleged by the applicant was $179,740.54. By the time of the penalty hearing the agreed amount had been reduced to $24,987.84 (to which interest was added).
The relevant industrial and statutory schemes relating to the enterprise and to the employees are, as noted above, complicated. I have been greatly assisted by the extent to which the parties were prepared to negotiate and exchange information. The fruit of that process was a detailed Agreed Statement of Facts (hereinafter the “ASOF”) and a Schedule of Admissions. In addition, I was provided with very detailed written submissions on penalty from each of the counsel for the parties, augmented by very detailed oral submissions. I have done my best to absorb and understand the detail of the legislative background to the conduct. At times the detail was difficult to grasp. When that has occurred, I have returned to the transcript of the penalty hearing to assist me. I hope that at the end of the process I have not misapprehended any relevant aspect of the allegations and the admissions but must note that the complexity of certain aspects of the matter was at times intimidating.
The parties made it clear when providing to me the ASOF that they understood that matters relating to the imposition of penalty and the subsidiary issues of what constitutes a course of conduct and whether and if so which contraventions should be grouped together, were all matters for the Court, and the Court alone, to determine. Ultimately and for reasons I hope to make clear, I have been prepared to proceed to sentence upon the basis of the parties’ agreements as to these matters. In any event, those agreements meant that the real area of operation for the exercise of my discretion was that relating to the monetary amount of penalty for each contravention.
I have found it unnecessary to recite in these Reasons all of the relevant factual history because of the level of agreement between the parties reflected in the ASOF.
The proceedings relate to the period 10 March 2005 to 11 December 2008.
In addition to the documents I have described to this point, I also had regard to the following documents:
a)An affidavit of David Gregory Ey, a solicitor acting for the applicant, to which affidavit are annexed detailed calculations of the amount paid to each of the relevant employees over the relevant period, the amount that ought to have been paid to such employees and a calculation of the difference between the two figures. The calculations are grouped as annexures as follows:
A. Post office and newsagency staff;
B. Service station staff and Subway restaurant staff;
C. Staff employed pursuant to a Certified Agreement (one only);
D. Interest calculations.
The affidavit also annexes a list of those employees who were not underpaid their statutory minimum entitlements in the period to which the proceedings relate.
b)An affidavit of the second respondent.
c)An affidavit of the third respondent.
d)A document marked as Exhibit 2 being a table setting out the applicant’s calculation of the range of pecuniary penalties.
e)A document marked as Exhibit 3 calculating the amount of aggregate underpayments as a percentage of estimated aggregate wages paid for the same period (the percentage is 1.77 per cent).
f)A document marked as Exhibit 4 evidencing the applicant’s legal expenses incurred from March 2010 to the date of the penalty hearing (the total was $82,417.28).
The applicant also provided me with a book of legislation and of the relative industrial instruments and I have referred to both throughout my considerations.
The second and third respondents first leased a service station in Whyalla in 1984. They purchased the freehold of the service station in 1987. They sold the lease in 1989 but remained as freehold owners. In 2001 they resumed the conduct of the lease of the service station. The first respondent had been incorporated in 1987. The first respondent then conducted the business of the service station but the second and third respondents owned the freehold.
In 2002 the first respondent purchased a Subway franchise and operated it in conjunction with the service station. In 2003 the first respondent purchased a newsagency and post office around the corner from the service station. In 2006 renovations were carried out at the service station to enable those businesses to be conducted at the same site as the service station business and the Subway restaurant business.
All of the businesses, and in particular the Subway restaurant and service station business, required a high number of staff. A traineeship organisation called Career Employment assisted the respondents in engaging a number of trainees.
When the respondents entered into a franchise agreement in relation to the Subway restaurant an advisory group called Enterprise Initiatives advised them to engage their staff pursuant to Australian Workplace Agreements (AWA’s). Enterprise Initiatives assisted in the drafting of the AWA’s. Subsequently and in 2005 Enterprise Initiatives advised the respondents to bring all of the employees, in whatever aspect of the business, under a certified agreement. That certified agreement, known as the Wegra Investments Pty Ltd Certified Agreement 2005 (“the Agreement”), was approved by the Australian Industrial Relations Commission in May 2005.
All but three staff members chose to enter the Agreement.
There were two fundamental problems with the way in which the respondents understood the Agreement to cover their employees. The first was that trainees were never able to be brought within the terms of the Agreement and that whereas the respondents paid trainees an amount calculated at 20 per cent less than the rate set out in the Agreement (as they would have otherwise been entitled to do under the various statutory schemes relating to trainees), in fact the respondents were not entitled to deduct that 20 per cent from their earnings.
The other difficulty was that whilst the Agreement applied to casual employees (as it was always intended to do) it did not apply to permanent part time employees and the respondents did not appreciate the distinction between the two categories of employee.
These two difficulties subsequently found expression in the respondents falling into breach of a range of industrial instruments in relation to a number of employment-related issues and those breaches have resulted in these proceedings.
In fact, the respondents were bound by a number of industrial instruments relating to their employees throughout the employment period of which they were unaware.
They were bound by a Notional Agreement Preserving a State Award derived from the Retail Industry (South Australia) Award (the “Retail NAPSA”) in relation to the post office and newsagency employees. Those employees were two in number. The total underpayments to these employees amounted to $10,002.09. Despite detailed enquiries the respondents were unable to provide their counsel with any instructions as to why the amount of underpayment to these two employees was egregious when compared to other categories of employees. I was told that specific instructions were sought in relation to that topic, but that the respondents were unable to account for why this is the case.
In addition, the respondents were bound by a NAPSA derived from the Vehicle Industry (South Australia) Repair, Service and Retail Award (the “Vehicle NAPSA”) in relation to employees of the service station who were driveway attendants and console operators and employees of the Subway restaurant who were roadhouse attendants but only in relation to these categories of employees who were also trainees.
In addition, of course, the respondents were bound, in relation to non-trainee staff of the service station who were driveway attendants and console operators and non-trainee staff of the Subway restaurant who were roadhouse attendants, by the Agreement.
Further, in relation to an employee named Pill, the respondents were bound by the terms of an AWA.
In relation to the post office and newsagency employees, the first respondent admitted to one breach of s.182(1) of the Act in relation to the employee Bastian (s.182(1) of the Act relates to guarantee of a basic periodic rate of pay under the Australian Pay and Classification Scale); to seven breaches of the Retail NAPSA being failure to pay penalty rate (one employee only); failure to pay overtime (both employees); failure to ensure meal breaks taken (both); failure to pay double time if no meal breaks were taken (both); failure to pay double time for hours worked on a public holiday (both); failure to pay for public holiday on rostered day off (one); and failure to pay annual leave loading (both); and to a breach of each of the following sections of the Act in relation to those employees, namely:
a)s.232(2) (a failure to accrue an amount of paid annual leave for each completed four week period of continuous service) – one employee;
b)s.235(1) (calculation of annual leave rate paid) – one employee;
c)s.235(2) (failure to pay for accrued untaken annual leave at the required rate) – both employees.
In relation to the service station and Subway employees who were not trainees and who were therefore covered by the Agreement (and in one respect by the Vehicle NAPSA) the first respondent admitted to the following contraventions:
a)Clause 9.1.2 of the Agreement (in relation to a single employee) being a breach that relates to working more than 14 consecutive days without four days off;
b)Clause 9.1.3 of the Agreement (in relation to a number of employees) who worked less than a minimum shift of three hours per engagement and did not receive a payment for a minimum of three hours on those occasions;
c)Clause 11.1 of the Agreement (in relation to a number of employees) who were not paid the applicable minimum rate of pay;
d)Clause 13.3 of the Agreement (in relation to one employee) who was not paid penalty rates for days worked in excess of 14 consecutive days without four days off;
e)Clause 14.1 of the Agreement (in relation to a number of employees) in respect of whom the first respondent did not ensure that meal breaks following working in excess of five hours were taken;
f)A contravention of the Vehicle NAPSA relating to a number of employees for failing to pay them for work done beyond five hours without a meal break at the rate of time and-a-half. (It was never made clear to me why the Vehicle NAPSA applied in the case of these employees in relation to this contravention but it was agreed by the parties that it did and I am prepared to accept that it did without further explanation).
In relation to employees of the service station and the Subway restaurant who were trainees, the following contraventions of the Act and of the Vehicle NAPSA were admitted:
a)In relation to a number of employees a breach of s.182(1) (failure to pay trainees guaranteed basic rate of pay);
b)In relation to a number of employees a breach of s.232(2) of the Act (failing to accrue an amount of annual leave for each completed four weeks of continuous service);
c)In relation to a number of trainees for breach of s.235(2) of the Act (failing to pay the trainees for accrued annual leave not taken upon their termination at an hourly rate no less than their guaranteed basic rate of pay);
d)Clause 6.2.2 of the Vehicle NAPSA in relation to a number of employees (for a failure to pay trainees who work in excess of five hours without a meal break at the rate of time and-a-half for those hours worked);
e)Clause 6.2.3 of the vehicle NAPSA in relation to a number of employees (for a failure to pay trainees time and-a-half for work done during meal breaks and until a meal break was allowed);
f)Clause 6.5.1.1 and 6.6.1.1 of the Vehicle NAPSA in relation to a number of employees (for failing to pay trainees time and-a half for hours worked on a Saturday and a Sunday after noon on a Saturday);
g)Clause 6.7.1.1 of the Vehicle NAPSA in relation to a number of employees (for failing to pay trainees for hours worked on a public holiday);
h)Clause 7.1.4.4 of the Vehicle NAPSA in relation to a number of employees (for failing to pay trainees annual leave loading).
In relation to the employee Pill the first respondent admitted to the following contraventions:
a)Clause 8.1(iii) of the AWA (failing to engage her for a minimum of two hours per engagement);
b)Clause 10.1 of the AWA (failing to pay her the applicable minimum rate of pay);
c)Clause 17.1 of the AWA (not ensuring meal breaks were taken by her when she worked more than five hours).
Matters relating to the nature of Mr Wegener’s involvement in the company’s contraventions were also the subject of agreement in the ASOF. It is conceded that Mr Wegener was responsible for the day to day management of the company’s operations and was responsible for implementing the Agreement and the AWA’s and he has conceded that he was aware that the Agreement operated in conjunction with industrial awards which supplied minimum terms of employment including penalty rates, loadings and other entitlements in the event that the Agreement did not contain a contrary provision or did not apply to the individual. He accepts that he was responsible for obtaining and implementing advice as to the management of the way in which the company dealt with matters relating to employees’ wages and entitlements under industrial instruments.
It is agreed that between February 2004 and March 2009 he was the manager of an employee by the name of Andrew Steny who was employed by the company as a bookkeeper and who was given the responsibility for payment of wages and entitlements and setting rosters for employees. From March 2009 Mr Wegener personally performed these functions himself. It is an agreed fact that Mr Wegener was knowingly concerned in the company’s contraventions within the meaning of s.728 of the Act. Importantly, however, it is agreed that he did not “deliberately intend” to contravene the Act and the industrial instruments. I will return hereafter to the tensions that to some extent exist between these competing agreed facts.
It is agreed that Mrs Wegener had no responsibility for matters relating to the engagement of the employees or payment of their wages or entitlements.
The ASOF contains an intimidating amount of agreed facts relating to the circumstances in which the contraventions were committed. I do not propose to recite those facts but I have read them. I am referring in particular to the contents of paragraph 21 of the ASOF.
The Workplace Ombudsman began an investigation in relation to complaints by a small number of Wegra employees in March 2007. The investigation was expanded in December 2007. A notice to produce documents was served on Mr Wegener on 11 December 2007. The documents sought were the employment records of 104 past or then current employees. In December 2008 the Workplace Ombudsman conducted a recorded interview with Mr and Mrs Wegener. A full year later in December 2009 the Fair Work Ombudsman notified the respondents of the proposed Statement of Claim and invited admission of the alleged contraventions. Notwithstanding the delay between the production of the documents and the interview and then the interview and the invitation to admit the contraventions identified in the Statement of Claim, the Fair Work Ombudsman provided the respondents with a period of only six days before the proceedings were commenced.
Following the institution of the proceedings, as already indicated, the parties were in negotiation for a period of two years before the penalty hearing was scheduled.
I have already noted (at [6]) the radical reduction in the underpayments alleged by the time of the penalty hearing.
Within a month of final agreement being reached as to the amount of money involved in the contraventions the full amount owing plus interest at an agreed rate of 8.5 per cent was paid by the second and third respondents to the Collector of Monies for distribution to the employees. The total amount paid, inclusive of interest, was $29,253.
The first respondent sold the service station business and the post office and newsagency business in June 2009. The Subway restaurant business was sold in December 2009. It was submitted, and I accept, that Mr and Mrs Wegener have postponed their retirement given the costs of these proceedings and they are not currently engaged in any business activities whether as directors of a company or otherwise. They have specifically eschewed any intention to engage in any retail activity or service station business or take away food business again or to offer employment to any other person.
Recently, in Fair Work Ombudsman v Melland Pty Ltd & Anor [2012] FMCA 645 I had occasion to summarise the existing state of the law in respect of the imposition of civil penalties in cases such as this. That decision involved contraventions of the Fair Work Act 2009 but the sentencing principles are essentially the same under this Act.
I had this to say at [35] to [49] of that Judgment:
35. Marshall J in McIver v Healey [2008] FCA 425 was dealing with an application for the imposition of penalties for breaching an award. He was dealing with the application pursuant to s.178 of the Workplace Relations Act 1996. Section 719(2) of the Workplace Relations Act 1996 provided that where multiple breaches of an award provision arose out of course of conduct by one person those breaches were to constitute one breach. In that case there were eight terms of the award that were breached. There were 41 different employees. In total there were 254 breaches of the award.
36. His Honour cited with approval the decision of Gray J in Gibbs v Mayor Counsellors and Citizens of City of Altona (1992) 37 FCR 216 at [233]:
The ascertainment of what is a term should not depend on matters of form, such as how the award maker has chosen to designate by numbers or letters the various provisions of an award, but on matters of substance, namely the different obligations which can be spelt out.
37. In that case, the penalty provisions in respect of some employees employed at earlier dates provided for a lesser penalty than for those who were employed at a later date but his Honour’s approach was to impose a penalty in respect of each single breach of the award (made up of eight different kinds of breach) in the case of each of the 41 employees. He imposed only one half of the maximum penalty for each breach and then, on the basis of the “totality principle”, reduced the aggregate fine from $91,300 to $70,000, but my purpose in referring to the case is to note the way in which he interpreted the “course of conduct” provision. He could have theoretically regarded the course of conduct as being constituted by the breach of the award i.e. eight different courses of conduct; or he could have regarded each of the 254 breaches as a single course of conduct. However, in the exercise of his discretion he dealt with the matter on the basis of the treatment of each of the individual employees as constituting a separate course of conduct.
38. The totality principle itself was considered by the Full Court of the Federal Court of Australia in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8. Gray J approached the totality principle differently from that of Buchanan J. In that case he said at [567]:
In determining the appropriate penalty for myself I take a different approach from that taken by Buchanan J. His Honour…has applied an approach that fixes a penalty for each category of breach at a figure that results in an aggregate sum that, in his Honour’s view, does not offend against the totality principle. My approach is more like that of Graham J, who… has accepted the magistrate’s aggregate of 88,000 but has determined by the application of the totality principle an appropriate overall totality. In other words, Graham J and I proceed by what the High Court has called “instinctive synthesis” …
39. In Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70 the Full Court of the Federal Court of Australia dismissed an appeal from the imposition of civil penalties relating to breaches of provisions of the Workplace Relations Act 1996, conduct which would now be dealt with as breaches of the general protections provisions of the Act. The appeal was dismissed and the decision raises two issues. The first is the breadth of the discretion the Court has in determining whether conduct (in this case relating to six separate contraventions relating to one employee resulting in six separate impositions of penalty) should be regarded as a single course of conduct. The plurality (Stone and Buchanan JJ) emphasised the flexibility possessed by a sentencing Judge. In relation to the submission that the multiple breaches should be regarded as a single course of conduct, they said (at [58]):
The appellant’s argument is not without some attraction. It would have been open to the primary judge to have treated the events to be involving in substance a single course of conduct … but he was not obliged to do so. There were other factors before the primary judge that suggested that the contraventions should be treated separately and as equally serious. The contraventions occurred on different days. They each involved conduct which, viewed in isolation, was of the same character and significance as the individual events concerning other employees…
40. They found that appellate intervention was not required or justified…
once it is accepted that there is no single correct approach to the task of deciding upon the appropriate penalties to be imposed for the admitted individual contraventions…. ([63])
41. The other issue addressed by the plurality is the issue of a “discount” for an early plea of guilty in civil penalty proceedings. They said at [76]- [77]:
… the rationale for providing a discount for an early plea of guilty in a criminal case does not apply neatly to a case, such as the present, where a civil penalty is sought and the case proceeds on pleadings. … Rather, 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
A respondent who admits liability will spare itself the unnecessary cost of a contested hearing. Its motivation, therefore, should not be regarded as unduly altruistic.
42. The decision of Tracey J in Kelly v Fitzpatrick [2007] FCA 1080 specifically adopted the list of matters to be taken into account in civil penalty hearings adumbrated by Mowbray FM in Mason & Harrington Corporation Pty Ltd [2007] FMCA 7 (at [14]). While the list is non-exhaustive (and it is a list of considerations which goes to the question of whether there should be a penalty at all and not just the quantum of the penalty) those factors are:
The nature and extent of the conduct which led to the breaches;
The circumstances in which that conduct took place;
The nature and extent of any loss or damage sustained as a result of the breaches;
Whether there had been similar previous conduct by the respondent;
Whether the breaches were properly distinct or arose out of one course of conduct;
The size of the business enterprise involved;
Whether the breaches were deliberate;
Whether senior management was involved in the breaches;
Whether the party committing the breach had exhibited contrition;
Whether the party committing the breach had taken corrective action;
Whether the party committing the breach had cooperated with the enforcement authorities;
The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
The need for specific and general deterrence.
43. The decision of Gyles J in Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550 is an interesting explication of the sentencing process in respect of civil penalties. The respondent was a small scale video hire shop and the contraventions related to a failure to pay a single casual employee the minimum rate of pay under the relevant award in six categories of circumstance. Those categories were as to the time of the week when the work was performed e.g. ordinary hours Monday to Friday, ordinary hours on a Sunday, out of ordinary hours on a Sunday, public holiday etc. The breaches occurred over a period of two and a half years and the total underpayment was approximately $10,000. His Honour dealt with the matter by imposing a penalty in respect of each category of offence over that period. The maximum penalty was $33,000 at the end of the period and $10,000 at the beginning of it. His Honour imposed six separate penalties of an aggregate amount of $25,000. His Honour said at [21]:
I have also in mind that, although technically all breaches do not arise out of the one set of circumstances, in a broad sense they do. There must be a sense of proportion. I am not sure that the totality principle is correctly identified as applicable in these circumstances but I think a sense of proportion for the overall conduct should be borne in mind.
44. His Honour said this on the issue of deterrence at [19]:
I take into account the need for specific and general deterrence. I appreciate that the penalty should not be oppressive and that it is not a criminal sanction. There is some evidence that a substantial penalty could have an impact on the viability of the respondent. However that may be, the non-adherence to the Award and the nature and scale of the underpayment here indicates that if the law is breached the business community should not get the idea that they can take the risk of underpaying and then buy their way out of it with a modest penalty. The penalty must be imposed at a meaningful level and, in a sense, the respondent must begin to actually hurt.
45. The decision of Driver FM in Rajagopalan v BM City Building Material Pty Ltd [2007] FMCA 1412 is a helpful case for a number of reasons. His Honour has regard to penalties imposed in other decisions of this Court and the Federal Court in coming to a determination as to the imposition of penalty in his case and in the end determines that the penalty should be fixed as falling “some way between” specific decisions considered by him. His Honour was dealing with a series of breaches of the Storemen and Packers, General State Award over the period of some four months. The matters relevant to the exercise of the discretion in that case were summarised at [40]:
There was only one employee involved and he has been compensated. The employer has shown contrition. However there was no evidence of a defective corrective action being taken by the employer to prevent similar breaches occurring in the future. The breaches were serious and over a lengthy period. The respondent is a small business, although I do not accept that small business, should, by the simple fact of their size, be subject to a lesser penalty than big business. Neither do I accept that delicate financial circumstances excuse an employer of the imposition of significant penalties.
46. His Honour had this to say on the issue of deterrence at [41]:
It is important that breaches of awards enterprise agreements and the like be deterred. It is particularly importance that deterrence be seen and acknowledged by persons that might otherwise display a cavalier attitude to their obligations.
47. The way in which the totality principle should be applied was discussed by Jessup J (with whom Lander J agreed) in Ponzio v B and P Caelli Constructions Pty Ltd & Anors [2007] FCAFC 65. Though dealing with a breach of radically different provisions of a breach of the Workplace Relations Act 1996 (s.187AA, dealing with making payments to an employee in relation to a period when an employee was engaged in industrial action) the judgment is of considerable assistance in respect of this issue. The Judge at first instance had considered that he was applying the totality principle when he approached the imposition of penalty on the basis of looking at the aggregate effect of the penalties and then dividing it by the number of individual contraventions. His Honour found that the Judge at first instance had fallen into error. He said that the position had been correctly stated by Goldberg J in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 at [53]:
The totality principle is designed to ensure that overall an appropriate sentence or penalty is appropriate and that the sum of the penalties imposed for several contraventions does not result in the total of the penalties exceeding what is proper having regard to the totality of the contravening conduct involved… but that does not mean that a court should commence by determining an overall penalty and then dividing it by the various contraventions. Rather the totality principle involves a final overall consideration of the sum of the penalties determined.
48. Lander J had a number of telling things to say about the imposition of penalty generally. He said (at [93]):
There are three purposes at least for imposing a penalty: punishment; deterrence; and rehabilitation. The punishment must be appropriate to the offence and in accordance with the prevailing standards of punishment: R v Hunter (1984) 36 SASR 101 at [103]. Therefore the circumstances of the offence or contravention are especially important. The penalty must recognise the need for deterrence, both personal and general. In regard to personal deterrence, an assessment must be made of the risk of re-offending. In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others that might be likely to offend: Yardley v Betts (1979) 22 SASR 108. The penalty should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases general deterrents will be the paramount factor in fixing the penalty: R v Thompson (1975) 11 SASR 217. In some cases, although hardly in this type of contravention, rehabilitation is an important factor.
49. And at [94]:
Where one act may involve a number of contraventions, as in this case, it would be generally inappropriate to impose separate penalties because almost inevitably that would offend against the totality principle as known to the criminal law. The better approach is to assess the culpability of the contravener and have regard to the number of employees affected by that action.
I propose to proceed in this case to impose penalty in accordance with the guidelines and principles arising from the cases discussed at [40].
The ASOF extends to an agreed position on the question of the number of separate contraventions in respect of which penalty should be imposed.
All of the breaches of the Act and of the Agreement and of the AWA and of the industrial instruments referred to herein are “applicable provisions” in terms of s.717 and s.719 of the Act.
Section719(2) of the Act provides:
(2) Subject to subsection (3), where:
(a) 2 or more breaches of an applicable provision are committed by the same person; and
(b) the breaches arose out of a course of conduct by the person;
the breaches shall, for the purposes of this section, be taken to constitute a single breach of the term.
Section 719(4) deals with the issue of maximum penalties.
(4) The maximum penalty that may be imposed under subsection (1) for a breach of an applicable provision is:
(a) 60 penalty units for an individual; or
(b) 300 penalty units for a body corporate.
A penalty unit is, pursuant to s.4AA of the Crimes Act 1914, the sum of $110. Therefore, in respect of each contravention the maximum penalty that can be imposed on the company is $33,000 and the maximum that can be imposed on Mr Wegra is $6,600.
The parties agree and I am prepared to proceed upon the basis of the application of s.719(2) to the circumstances of this case in such a way as results in 25 separate contraventions. This is achieved by identifying the following single courses of conduct:
a)Contraventions of Workplace Relations Act – four contraventions, namely:
i)section182(1)
ii)section.232(2)
iii)section 235(1)
iv)section 235(2)
b)Contraventions of Retail NAPSA – seven contraventions, namely:
i)clause 6.5
ii)clause 6.10
iii)clause 6.11.1
iv)clause 6.11.4
v)clause 7.6.5
vi)clause 7.7.2(a)
vii)clause 7.1.6.1
c)Contraventions of Vehicle NAPSA – six contraventions, namely:
i)clause 6.2.2
ii)clause 6..2.3
iii)clause 6.5.1.1
iv)clause 6.6.1.1
v)clause 6.7.1.1
vi)clause 7.1.4.4
d)Contraventions of the Agreement – five contraventions, namely:
i)clause 9.1.2
ii)clause 9.1.3
iii)clause 11.1
iv)clause 13.3
v)clause 14.1
e)Contraventions of the AWA – three contraventions, namely:
i)clause 8.1(iii)
ii)clause 10.1
iii)clause 17.1
The agreement between the parties as to the course of conduct provisions goes even further. They are agreed that there should be eight separate groupings of the 25 contraventions described in [46] and that each of these should constitute a single contravention.
The rationale for the groupings is as follows:
a)The relevant provisions of the Act and the Agreement and the AWA relating to the applicable minimum rate of pay should be grouped (three in number);
b)The relevant provisions of the Act and the Retail NAPSA and the Vehicle NAPSA relating to failure to pay accrued annual leave at a rate equal to basic periodic rate of pay and to pay the annual leave loading should be grouped (five in number);
c)The relevant provisions of the Retail NAPSA and the Vehicle NAPSA relating to the failure to pay penalties for work conducted on a weekend day should be grouped (three in number);
d)The relevant provision of the Retail NAPSA and the Vehicle NAPSA relating to failure to pay penalties for work conducted on a public holiday and failure to pay those employees who were not rostered on public holidays should be grouped (three in number);
e)The relevant provisions of the Agreement relating to employees being required to work in excess of consecutive days limitations and a failure to pay penalties for the work conducted beyond those limitations should be grouped (two in number);
f)The relevant provisions of the Agreement and of the AWA relating to failure to provide the minimum engagement period should be grouped (two in number);
g)The relevant provisions of the Retail NAPSA and Agreement and the AWA and the Vehicle NAPSA relating to failure to provide meal breaks and failure to pay penalties for work conducted during a meal break until it was given should be grouped (three in number);
h)The single contravention of the relevant provision of the Retail NAPSA relating to failure to pay overtime rates for overtime worked on days other than Sundays and public holidays should constitute a single contravention.
The ordering of the contraventions into single courses of conduct pursuant to s.719(2) and then their collection under a further series of groupings (essentially a two-phase exercise of this power), as the parties have agreed is appropriate, is consistent with the purpose of not sentencing twice for what is in truth one category of offending. It is a course of action explicitly approved by Driver FM in Fair Work Ombudsman v Roselands Fruit Market Pty Ltd & Anor [2010] FMCA 599 at [24]. It is an approach to sentence in this matter which the parties have agreed and which I adopt with approval.
The following are the principal matters which the applicant asked me to have regard to in fixing penalty:
a)That the failure to comply with the legislation and industrial instruments related to fundamental obligations of employers to employees. So, for example, whilst a failure to provide employees with an unpaid meal break following shifts of more than five hours might seem to be a relatively minor breach, the need to provide workers with adequate rest breaks is a fundamental obligation of employment.
b)The failure of the respondents to provide employees with annual leave or paid their entitlements to accrued but unused annual leave upon termination, deprived those employees from enjoying adequate rest and recuperation.
c)The contraventions of the respondents as they related to the service station and Subway restaurant are aggravated by the fact that the majority of these employees affected were under 21 years of age.
d)Where contraventions did occur, in the great majority of cases, they occurred throughout the entirety of that worker’s period of employment (though it was conceded most periods of employment were relatively short).
e)The majority of all underpaid workers were 21 years of age or under.
f)Even though no more than 18 employees were employed at any one time, the high turnover of employees meant that a significant number of employees were affected by the breaches (54 in all).
g)The period of time when Mr Steny was responsible for payment of wages and entitlements was approximately five years and encompassed the period of all the admitted contraventions and during that period Mr Wegener demonstrated a serious lack of appropriate supervision of that employee.
h)The conduct was inconsistent with one of the principal objects of the Workplace Relations Act which was the maintenance of an effective safety net of employer obligations.
i)General deterrence is an important factor because of the fact that the employees affected were in the main vulnerable on account of their youth.
The applicant sought an imposition of penalty on both the company and Mr Wegener.
In respect of the eight separate groupings of contravention the applicant sought the following penalties:
a)Failure to pay minimum rates of pay – mid to high range penalty;
b)Failure to pay annual leave at appropriate rate – a low to mid range penalty;
c)Failure to pay penalties for work on a Saturday or Sunday – a mid to high range penalty;
d)Failure to pay penalties for work conducted on a public holiday (including failure to pay those not rostered on public holidays) – a low to mid range penalty;
e)Employees working in excess of consecutive days limitations and failure to pay those who did appropriately – a low range penalty;
f)Failure to provide the minimum engagement period – a low to mid range penalty;
g)Failure to provide meal breaks and to pay penalties for work conducted during meal breaks and until meal break provided – a mid to high range penalty;
h)Failure to pay overtime rates – a low to mid range penalty.
The following matters were relied upon by the respondents in their submissions relating to penalty:
a)The respondents were concerned to provide employment to the large numbers of youth unemployed in the Whyalla area and that this desire informed the expansion of the business to include the Subway restaurant in 2002 and the post office/newsagency in 2003.
b)From October 2003 and as a result of purchasing the Subway restaurant franchise the respondents sought advice from an organisation called Enterprise Initiatives in relation to management of employee matters and that Enterprise Initiatives was responsible for the establishment of the Agreement and misadvised the respondents in relation to matters such as whether penalty rates for weekend work and payment of annual leave were required for persons working under this Agreement. A significant aspect of inaccurate advice provided to them was that trainees were not in fact covered by the Agreement.
c)That the Wegeners were reliant upon Mr Steny, the bookkeeper, for the entire period to which the breaches relate.
d)That, mitigating the failures as they relate to the provision of meal breaks and the payment of extra money for those that did not take meal breaks, was the circumstance that all employees were provided with a free meal and unlimited drinks for each shift whatever the duration of the shift.
e)That the respondents completely misunderstood that the Agreement did not apply to traineeships.
f)That of the 54 workers underpaid, 25 of them were underpaid less than $100 and 45 were underpaid less than $500. Looked at from a different perspective, the underpayments are 1.7 per cent of the total wage bill for the period to which the contraventions related.
g)There is no prior misconduct in relation to these matters.
h)Total turnover for all aspects of the business aggregated was the following:
i)Financial year ending 2006 – $5,125,676;
ii)Financial year ending 30 June 2007 – $5,898,311
iii)Financial year ending 30 June 2008 – $6,527,637
iv)Financial year ending 2009 –$5,874,065
Fuel sales account for 80 per cent of this turnover. These matters are put so as to provide a perspective on the underpayments relative to the dimensions of the turnover.
i)The breaches were not deliberate in that the respondents did not set out to underpay the employees. The breaches arose either because the respondents were wrongly following the provisions of the Certified Agreement in respect of employees that were not covered by it and in relation to aspects of employment it did not reach to; or they were not careful enough in ensuring appropriate record keeping or adherence to requirements.
j)Whilst the Wegeners had operated a service station for two separate periods totalling ten years prior to the operation of the business relevant to these contraventions, their previous experience was related to a much smaller scale enterprise.
k)The Wegeners have co-operated with the Fair Work Ombudsman throughout each of the separate phases of the proceedings. They produced all of the documents they were asked to produce in December 2007; they participated in an extensive interview in December 2008; whilst they were unable in the time given them by the Fair Work Ombudsman to admit the contraventions when they were first formulated and given to them in December 2009, they continued to exhibit a high level of co-operation after the proceedings were issued as evidenced by the ASOF.
l)The second and third respondents have made clear that they will personally meet any penalties imposed upon the first respondent in circumstances where the first respondent has no assets.
m)That the full amounts of the underpayments and interest were paid by the second and third respondents to the Collector of Monies within four weeks of the amount being agreed and that the promptness of the payment is tangible evidence of contrition.
n)That there is no need for specific deterrence because they are no longer operating a business or intending to operate the same.
In respect of each of the eight groupings of offence the respondents submitted that there should a penalty in the lower range.
There is a tension between what the parties agree on the topic of whether the breaches were deliberate and the related issue of whether the breaches were knowing. In respect of both matters the respondents refer to the advice given by Enterprise Initiatives and the role fulfilled by Mr Steny. The first point of tension is the admission by the second respondent that he was knowingly concerned with the contraventions; paragraph 15 of the ASOF contains an acknowledgement by the second respondent that he was knowingly concerned in the first respondent’s contraventions. But paragraph 16 of the ASOF then says as follows:
Without derogating from the admission made by Mr Wegener in paragraph 15 above, Mr Wegener did not deliberately intend to contravene the Workplace Relations Act or the identified industrial instruments.
The plurality judgment of the High Court in Yorke v Lucas [1985] HCA 65 said of a provision of the Trade Practices Act identical to s.728(2)(c) of the Act at [16]:
There can be no question that a person cannot be knowingly concerned in a contravention unless he has knowledge of the essential facts constituting the contravention.
And as Brennan J (as he then was) pointed out in the single judgment of that same case (at [12] of his judgment) that the phrase is taken from a passage in the judgment of Lord Goddard CJ in Johnson & Youlden (1950) 1KB 544 at 546:
Before a person can be convicted of aiding and abetting the commission of an offence he must know the essential matters that constitute that offence. He need not actually know that an offence ahs been committed, because he may not know that the facts constituting an offence and ignorance of the law is not a defence.
His Honour goes on to cite with approval the judgment of Wilson, Deane (as he then was) and Dawson JJ in Giorgianni v R [1985] HCA 29 at [21]. Whilst his Honour sets out (at [13] of his judgment) only a portion of the relevant passage, I set out the paragraph in full, assisting me as it does to coming to an understanding of what the second respondent’s admissions about being knowingly concerned actually mean given the facts of this case:
For the purposes of many offences it may be true to say that if an act is done with foresight of its probable consequences, there is sufficient intent in law even if such intent may more properly be described as a form of recklessness. There are, however, offences in which it is not possible to speak of recklessness as constituting a sufficient intent. Attempt is one and conspiracy is another. And we think the offences of aiding and abetting and counselling and procuring are others. Those offences require intentional participation in a crime by lending assistance or encouragement. They do not, of course, require knowledge of the law and it is necessary to distinguish between knowledge of or belief in the existence of facts which constitute a criminal offence and knowledge or belief that those facts are made a criminal offence under the law. The necessary intent is absent if the person alleged to be a secondary participant does not know or believe that what he is assisting or encouraging is something which goes to make up the facts which constitute the commission of the relevant criminal offence. He need not recognize the criminal offence as such, but his participation must be intentionally aimed at the commission of the acts which constitute it. It is not sufficient if his knowledge or belief extends only to the possibility or even probability that the acts which he is assisting or encouraging are such, whether he realizes it or not, as to constitute the factual ingredients of a crime. If that were sufficient, a person might be guilty of aiding, abetting, counselling or procuring the commission of an offence which formed no part of his design. Intent is required and it is an intent which must be based upon knowledge or belief of the necessary facts. To the extent that Reg. v. Glennan suggests the contrary, it is not, in our view, in accordance with principle and does not correctly state the law.
So, in drawing the distinction between being knowingly concerned in but not deliberately intending to contravene the various instruments and statutory provisions, the second respondent, for the admission to be able to stand, must be taken not to be suggesting mere recklessness. He must have deliberately aimed at paying the inadequate amounts of wage, for example, or not ensuring the taking of meal breaks, as another example, even if he did not recognise that such conduct on his part constituted a breach of the relevant applicable provision. But does that really amount to being knowingly concerned in the breaches? Surely, each act or omission is only a contravention because it either had or did not have a certain content or a certain minimum content. There is no knowingness involved if the second respondent thinks that the first respondent’s payments or attitude to meal breaks (to follow the two examples through) are satisfactory or meet the requirements of the instrument or the statute. Knowledge of the actual content of the legal requirement must be imputed in such a case for the breach to be established and given that I am dealing with a guilty plea here, that same knowledge must be taken to be admitted. This is the tension to which I have referred exists at [15] and [16] of the ASOF.
The tension is a function, I think, of the terse nature of the description of the breach in the section of the Act which actually creates the relevant offence. Section 719(1) simply states:
(1)An eligible court may impose a penalty in accordance with this Division on a person if:
(a) the person is bound by an applicable provision; and
(b) the person breaches the provision.
The second respondent’s liability cannot arise by simply positing that he knew that the first respondent had, for example, made some non-specific payment to the employees who were trainees. He must be taken to have known that in paying the trainees pursuant to the Agreement he was underpaying them. The breach only arises by him intending that the first respondent paid the trainees a specific (and inadequate) amount.
For the admission of being knowingly concerned in these contraventions to have any meaning I must read down the use of the expression “did not deliberately intend to contravene the Workplace Relations Act or the identified instruments” in [16] of the ASOF in such a way as to still be left with an admission that the payments (or the other acts of omissions) failed to meet a prescribed standard or content and that they were to that extent deliberate. That occasions some difficulty but the difficulty may be obviated on account of the view I have taken to another important aspect of the sentencing process, to which I will now refer.
The second respondent, through his counsel, made it clear to the Court that any civil penalties imposed on Wegra Investments Pty Ltd, the first respondent, would be paid by him.
I was told this was because Wegra Investments had ceased trading and had no income nor no assets.
The applicant sought the imposition of civil penalties on both the first and second respondents.
Wegra Investments was at all times the alter ego of its members and directors, namely Mr and Mrs Wegener. It had no other directors. The profit it conducted from trading benefited Mr and Mrs Wegener and no-one else.
Wegra Investments will be unable to pay any civil penalty imposed unless it is paid by Mr Wegener on its behalf. He has offered to do that. He has not made such an offer contingent on there being no penalty imposed on him. I was certainly not told anything to that effect.
Imposing civil penalties on each of the first and second respondents would be futile. It would also be unfair in my view. Mr Wegener should be held to account for the contraventions his company committed. However, he should not be punished separately.
I propose to impose civil penalties upon Wegra Investments Pty Ltd in respect of each of the contraventions. I am doing so on the basis that Mr Wegener will pay those penalties within a reasonable time. I will adjourn the question of the penalty to be imposed upon him to enable him to do so. If he does, no further penalty will be imposed on him when the Court reconvenes. If he does not then I will proceed to impose penalty upon him and in that event I can revisit the issue relating to whether on the plea he made Mr Wegener can be taken to have been knowingly concerned in the contraventions.
The breaches relating to minimum rates of pay not being observed are, in my view, the most serious. The breaches relating to the failure to provide a minimum engagement period and the breach relating to the failure to pay overtime for days other than a Sunday or a public holiday are, in my view, the least serious. The other breaches fall somewhere between those two categories of breach in seriousness. In fixing a penalty for each of the groupings I bear in mind that they each involve multiple occasions of non-observance of the relevant statutory provision or industrial instrument.
I explicitly sentence the first respondent upon the basis of an assumption that its officers (or Mr Wegener in particular) knew that the relevant statutory provisions or industrial instruments were not being observed and to that extent regard the contraventions as deliberate, for the reasons discussed at [56 ] to [63 ] above.
I have given weight to the amount of legal costs that the respondents have incurred and the period of time that has been involved in a resolution of the matters set out in the ASOF.
I have also given significant weight to the extent to which the amount alleged to have been underpaid to the various employees has been radically revised as a result of the negotiations between the parties.
I also give significant weight to the fact that the Wegeners are effectively retired and that there is little or no likelihood of a recurrence of this behaviour and to that extent specific deterrence is not relevant.
General deterrence is relevant. I accept the applicant’s concerns that employers must be encouraged to observe the relevant employment requirements especially as they relate to young people.
I consider the following penalties to be appropriate:
a)In respect of the group of contraventions relating to failure to pay the applicable minimum rate of pay, a penalty of $10,000;
b)In respect of the group of contraventions relating to the failure to pay accrued annual leave and annual leave loading, a penalty of $4,000;
c)In respect of the group of contraventions relating to failure to pay penalties for work conducted on a Saturday or Sunday, a penalty of $4,000;
d)In respect of the group of contraventions relating to failure to pay penalties for work conducted on a public holiday and related contraventions, a penalty of $4,000;
e)In respect of the group of contraventions relating to working in excess of the consecutive days limitations and failure to pay penalties beyond those limitations, a penalty of $4,000;
f)In respect of the group of contraventions relating to failure to provide the minimum engagement period, a penalty of $2,000;
g)In respect of the group of contraventions relating to failure to provide a meal break and penalties for work conducted during a meal break and until a meal break was provided, a penalty of $4,000;
h)In respect of the single contravention for failure to pay overtime rates for overtime worked on days other than Sundays and public holidays, a penalty of $2,000.
Cumulatively, the penalties are $34,000.
I have then considered whether that is an appropriate penalty to impose upon the first respondent having regard to the totality principle discussed above. I consider that it is appropriate.
I order accordingly.
I certify that the preceding eighty (80) paragraphs are a true copy of the reasons for judgment of Lindsay FM
Date: 15 October 2012
2
13
3