Fair Work Ombudsman v Westbridge Constructions (Vic) Pty Ltd
[2022] FedCFamC2G 421
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Westbridge Constructions (Vic) Pty Ltd [2022] FedCFamC2G 421
File number(s): MLG 2042 of 2021 Judgment of: JUDGE SYMONS Date of judgment: 2 June 2022 Catchwords: INDUSTRIAL LAW – Fair Work – parties by consent seek declaration of contravention of the Fair Work Act 2009 (Cth) – failure of the respondent to comply with compliance notice - dispute as to whether penalty should be imposed and level of penalty to be imposed – consideration of nature and circumstances of the conduct – consideration of any contrition, corrective action and cooperation with enforcement authority – the need for specific and general deterrence – penalty order made Legislation: Evidence Act 1995 (Cth) s 191
Fair Work Act 2009 (Cth) ss. 90, 545, 546, 547, 716
Building and Construction General On-site Award 2020 cl 28.2
Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157; [2018] HCA 3
Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; [2015] HCA 46
FWO v Nobrace Centre Pty Ltd & Anor (No 2) [2019] FCCA 2144
Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080
Jordan v Mornington Inn Pty Ltd (2007) 166 IR 33; [2007] FCA 1384
Division: Division 2 General Federal Law Number of paragraphs: 47 Date of last submission/s: 23 May 2022 Date of hearing: 23 May 2022 Place: Melbourne Solicitor for the Applicant: Fair Work Ombudsman Respondent: Ms Nott ORDERS
MLG 2042 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: WESTBRIDGE CONSTRUCTIONS (VIC) PTY LTD
Respondent
ORDER MADE BY:
JUDGE SYMONS
DATE OF ORDER:
2 JUNE 2022
THE COURT DECLARES BY CONSENT THAT:
1.The respondent contravened s 716(5) of the Fair Work Act 2009 (Cth) (“FW Act”) by failing to comply with the Compliance Notice issued on 2 October 2020.
THE COURT ORDERS BY CONSENT THAT:
Compliance Notice
2.Pursuant to s 545(1) of the FW Act, the respondent take the outstanding steps that were required by the Compliance Notice within 60 days of this order, by:
(a)paying the amount of $18,858.78 (gross) (“Underpayment Amount”) into the Employee’s nominated bank account;
(b)calculating and paying any additional superannuation contributions into the Employee’s nominated superannuation fund for additional superannuation contributions required to be paid on the Underpayment Amount pursuant to clause 28.2 of the Building and Construction General On-site Award 2020; and
(c)providing proof to the applicant that the amounts referred to in subparagraphs 2(a) and 2(b) have been rectified.
3.Pursuant to s 547(2) of the FW Act, the respondent pay interest (calculated in accordance with the applicable pre-judgment interest rate prescribed by the Federal Court of Australia) to the Employee on the amount owed to the Employee pursuant to paragraph 2(a) above and within 60 days of this order.
BY ORDER OF THE COURT:
4.Pursuant to s 546(1) of the FW Act, the respondent pay a pecuniary penalty to the Commonwealth in the amount of $14,320 with respect to the contravention by the respondent pleaded in declaration 1 above.
5.The applicant has liberty to apply on seven days’ notice in the event that the respondent fails to comply with any of the preceding orders.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE SYMONS:
INTRODUCTION
This is an application for the imposition of a penalty in respect of the respondent’s failure to comply with a compliance notice issued pursuant to s 716(2) of the Fair Work Act 2009 (Cth) (“FW Act”).
The respondent was represented in this proceeding by its secretary, Ms Nott, who (as a non-lawyer) was granted leave pursuant to rule 9.04 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) to carry on the proceedings and appear for the respondent.
The respondent has cooperated with the applicant and signed a statement of agreed facts by which it agrees to the bulk of the orders sought in this matter.[1] At the hearing (which was conducted using Microsoft Teams audio-visual technology), the statement of agreed facts was tendered pursuant to s 191 of the Evidence Act 1995 (Cth).
[1] Statement of Agreed Facts filed on 3 November 2021.
By the statement of agreed facts, the respondent has admitted to contravening s 716(5) of the FW Act by failing to comply with a compliance notice issued on 2 October 2020.[2]
[2] Statement of Agreed Facts filed on 3 November 2021 at paragraph [2].
The only outstanding issue is whether a penalty should be imposed and if so, the size of the penalty.
BACKGROUND
The applicant commenced an investigation into the respondent’s compliance with workplace laws in about July 2020.[3]
[3] Statement of Agreed Facts filed on 3 November 2021 at paragraph [6].
Following this investigation, the applicant formed a reasonable belief that the respondent had contravened the Building and Construction General On-Site Award 2010 (“Building and Construction Award”) and s 90(2) of the FW Act by failing to pay its employee, Mr Adam Christie, all of his entitlements under the Building and Construction Award and by failing to pay to Mr Christie accrued annual leave upon termination of his employment. Mr Christie was employed by the respondent between 13 August 2018 and 5 February 2020. The alleged underpayments related to minimum wages, overtime, annual leave and annual leave loading.[4]
[4] Statement of Agreed Facts filed on 3 November 2021 at paragraphs [7] and [8]
On the basis of this belief, the applicant gave a compliance notice to the respondent on 2 October 2020 which required the respondent to take certain steps to remedy the contraventions. Those steps included the requirement that the respondent calculate the amounts owing to the employee, make those payments to the employee by 20 November 2020, and produce evidence to the respondent of having done so by 27 November 2020.[5]
[5] Statement of Agreed Facts filed on 3 November 2021 at paragraphs [9] and [10]
As stated, it is common ground that the respondent failed to comply with the compliance notice and the respondent admits that it contravened s 716(5) of the FW Act.[6] It is also common ground that the amount payable to the employee under the compliance notice is $18,858.78 (“underpayment amount”) plus the applicable superannuation payment. This amount remains unpaid.[7]
[6] Statement of Agreed Facts filed on 3 November 2021 at paragraph [15].
[7] Statement of Agreed Facts filed on 3 November 2021 at paragraph [16].
ISSUES FOR CONSIDERATION
The parties consent to the following declaration and orders being made:[8]
[8] Statement of Agreed Facts filed on 3 November 2021 at paragraphs [17] to [20]
(1)A declaration that the respondent contravened s 716(5) of the FW Act by failing to comply with the compliance notice issued on 2 October 2020.
(2)An order pursuant to s 545(1) of the FW Act that the respondent within 60 days of the order:
(a)pay the amount of $18,858.78 (gross) into the employee’s nominated bank account;
(b)calculate and pay any additional superannuation contributions in the employee’s nominated superannuation fund for additional superannuation contributions required to be paid on the underpayment amount, pursuant to clause 32.2 [sic][9] of the Building and Construction Award; and
(c)provide proof to the applicant that the amounts referred to in subparagraphs 2(a) and 2(b) have been rectified.
(3)An order pursuant to s 545(1) and s 547(2) of the FW Act that the respondent pay interest (calculated in accordance with the applicable pre-judgment interest rate prescribed by the Federal Court of Australia) on the amount owed to the employee pursuant to paragraph 2(a) above.
(4)The applicant have liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
[9] The reference to cl 32.2 of the Award was inadvertent. The final orders make reference to the correct Award provision, namely, cl 28.2.
As stated, the only issue for determination by this Court is whether, and in what amount, a penalty order should be made against the respondent.
SUBMISSIONS AND EVIDENCE ON PENALTY
Orders were made by the Court on 3 November 2021 which provided a timetable for the parties to file and serve submissions and any evidence upon which they would seek to rely on the question of penalty.
The applicant filed submissions and an affidavit of Monica Zhang and Laura Willoughby on 1 December 2021.
Ms Nott appeared for the respondent at the hearing before me. The respondent did not file any written submissions or place before the Court any evidence in admissible form relevant to the question of penalty. I did however invite Ms Nott to make submissions orally at the hearing although noting that the failure to file evidence would necessarily limit her ability to do so.
PENALTY
Compliance notice
Section 716(5) of the FW Act provides that a person must not fail to comply with a compliance notice properly given. That section is a civil remedy provision. The power to issue a compliance notice was introduced as an alternative process to deal with an employer’s failure to meet their minimum entitlement obligations without the need to commence litigation.
This Court has previously recognised that compliance notices provide an efficient mechanism to rectify identified contraventions, including the underpayment of minimum entitlements to employees, without the need for costly and often time-consuming litigation.[10]
[10] See, eg, FWO v Nobrace Centre Pty Ltd & Anor (No 2) [2019] FCCA 2144 and the cases referred to in that decision.
Relevantly, s 716(4B) of the FW Act provides:
A person who complies with a notice in relation to a contravention of a civil remedy provision is not taken:
a) to have admitted to contravening the provision; or
b) to have been found to have contravened the provision.Had the respondent complied with the compliance notice, these proceedings would not have been necessary, and moreover, there would have been no finding of a contravention or the capacity to impose a penalty on the respondent.
While the respondent has cooperated with the applicant to the extent that it has joined in an agreed statement of issues and admitted the breach of s 716(5) of the FW Act, it has not remedied the underpayments. The result is that the employee, Mr Christie, has been out of funds now for a period in excess of 18 months since compliance was required under the compliance notice, and a significantly greater period when viewed against the timeframe of his employment with the respondent.
Penalty range sought
Applicant’s submissions
The applicant seeks that a penalty be imposed in the range of $13,320 to $15,984. Viewed in context, this represents a penalty range of 40 to 48 per cent of the maximum penalty of $33,300 available for the contravention by a corporation of s 716(5) of the FW Act.[11]
[11] This amount is calculated based on a penalty unit amount of $222.00 which applies to contraventions occurring on or after 1 July 2020. Section 12 of the FW Act provides that penalty unit has the same meaning as contained in s 4AA of the Crimes Act 1912 (Cth).
Respondent’s submissions
Although the respondent did not say so explicitly, I understood its position to be that it resisted the making of an order that it be required to pay a pecuniary penalty in any amount. In very brief submissions to the Court, Ms Nott said that while the respondent understood that it should have been making payments to Mr Christie in correct amounts, its failure to do so was “stupid” and reflected an agreement that had been made between Mr Christie and the respondent at around the time that Mr Christie commenced employment with the respondent. Ms Nott told the Court that the respondent intended to rectify the underpayment to Mr Christie but that it did not presently have funds available to do so as while it remained registered, it was not trading. Ms Nott told the Court that the respondent anticipated that it would receive funds in the future as a result of litigation that was on foot and that these funds would be applied against the underpayment amount.
Factors relevant to penalty
As noted in the applicant’s submissions, the primary purpose of civil penalty provisions such as those under consideration in this matter is to promote the public interest in compliance and to impose a price on contravention at a level which is sufficiently high that it is likely to have an effect on both specific and general deterrence.[12]
[12] See, eg, Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at [55] and [110].
Similarly, in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157 at [116], the High Court considered the purpose and intent of the Court’s powers under the FW Act to order the imposition of civil penalties. Keane, Nettle and Gordon JJ relevantly stated:
[116]As has been observed, the principal object of an order that a person pay a pecuniary penalty under s 546 is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners. According to orthodox sentencing conceptions as they apply to the imposition of civil pecuniary penalties, specific deterrence inheres in the sting or burden which the penalty imposes on the contravener. Other things being equal, it is assumed that the greater the sting or burden of the penalty, the more likely it will be that the contravener will seek to avoid the risk of subjection to further penalties and thus the more likely it will be that the contravener is deterred from further contraventions; likewise, the more potent will be the example that the penalty sets for other would-be contraveners and therefore the greater the penalty’s general deterrent effect. Conversely, the less the sting or burden that a penalty imposes on a contravener, the less likely it will be that the contravener is deterred from further contraventions and the less the general deterrent effect of the penalty. Ultimately, if a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so it will be unlikely, or at least less likely, to achieve the specific and general deterrent effects that are the raison d’etre of its imposition.
It is well recognised that in determining whether, and if so, what penalty ought to be imposed in a particular matter, the Court is required to have regard to a range of factors.[13] That list, while convenient, does not prescribe or limit the relevant matters to which a court must or may have regard.
[13] See, eg, Kelly v Fitzpatrick [2007] FCA 1080 at [14].
Nature and circumstances of the conduct and extent of any loss
As noted above, the compliance notice regime was introduced as a means to quickly and inexpensively resolve underpayment claims. Had the respondent complied with the compliance notice within the time frame specified, this litigation would have been avoided.
Moreover, and despite having been provided with ample time to comply with this compliance notice, the respondent had still not substantially complied as at the date of the hearing. Indeed, the only steps taken (in partial) compliance with the compliance notice were the three attempts made by the respondent to produce schedules of calculations to Inspector Zhang on 20 November 2020, 26 November 2020 and 3 December 2020.[14]
[14] Statement of Agreed Facts filed on 3 November 2021 at paragraph [12]; Affidavit of Xuan (Monica) Zhang filed on 1 December 2021 at paragraph [9].
In addition, the underpayments to which the compliance notice was directed amount to almost $19,000, incurred over a period of roughly, 18 months. This is a significant amount of money owing to an employee who was engaged as an apprentice, one of the more vulnerable class of worker recognised by the Building and Construction Award.
The applicant submits that it is also relevant to this consideration that the respondent had knowledge that Mr Christie was underpaid through a series of communications exchanged with Fair Work Inspector Zhang during the investigation, prior to, and after the giving of the compliance notice.[15]
[15] Affidavit of Xuan (Monica) Zhang filed on 1 December 2021 at paragraphs [7] and [9]-[11].
In circumstances where (as the applicant correctly submits) the Court’s focus should be directed to the non-compliance with the compliance notice, rather than the contraventions alleged in it, I have taken this factor into account. While it is not entirely clear whether the respondent understood that it was failing to pay Mr Christie at the rates prescribed in workplace laws during his employment, it was certainly possessed of this knowledge by at least September 2020.[16]
[16] Affidavit of Xuan (Monica) Zhang filed on 1 December 2021 at paragraph [7].
Compliance with minimum standards
It was submitted for the applicant that the respondent’s failure to comply with the compliance notice undermined the FW Act’s enforcement framework and the entitlements it is designed to protect.
The applicant emphasised that one of the principal purposes of the FW Act is to provide a guaranteed safety net of fair, relevant, and enforceable minimum terms and conditions for all employees (s 3(b)). This objective was frustrated by the respondent.
There is much force to this submission. Moreover, if compliance notices are to operate as an effective enforcement mechanism with the benefit of avoiding additional costs and delay associated with litigation, a breach of such notices must attract a penalty at a sufficient level to deter other employers from simply ignoring such notices or otherwise failing to comply with them.
The financial circumstances of the respondent
As noted above, in oral submissions for the respondent, Ms Nott indicated that the financial situation of the respondent was precarious given that although registered, it was no longer trading. Its only hope of making rectification of the underpayment amount was through the anticipated proceeds of (unidentified) litigation.
Although the respondent has not filed any material in this matter, I have considered the correspondence annexed to the two affidavits filed by and relied upon by the applicant.[17]
[17] Affidavit of Xuan (Monica) Zhang filed on 1 December 2021 and affidavit of Laura Willoughby filed on 1 December 2021
This material indicates that the respondent produced to the applicant miscellaneous documents directed at substantiating its claim of (corporate) impecuniosity. The documents comprised:
(a)a screen-shot of bank transactions over the period 17 January 2021 to 15 February 2021;
(b)a list of transaction on a visa account over the period 22 January 2021 to 21 May 2021 recording a balance of $250.20 (Dr)[18]; and
(c)a statement of business everyday account for the period 1 January 2021 to 31 March 2021 recording a closing balance of $2,360.18 (Dr).[19]
[18] Annexure LW-3 to the affidavit of Laura Willoughby filed on 1 December 2021
[19] Annexure LW-3 to the affidavit of Laura Willoughby filed on 1 December 2021
The respondent also referred, in email and telephone communications exchanged with representatives of the applicant, to a decline in business activities attributed to the Covid-19 pandemic, outstanding funds owed by clients which it hoped to recoup, and an activity statement debt owed to the ATO. In an email sent by Ms Nott to Ms Willoughby on 28 September 2021, Ms Nott confirmed that the respondent had failed to comply in making payments to Mr Christie. By way of explanation, Ms Nott said:
…The payment arrangement was not met due to the fact that the company had ceased trading and was waiting on money owed (through ongoing court proceedings to make these payments). The court proceedings are being finalised shortly (before Christmas I am told) and we should then have the money to pay Adam. [20]
[20] Annexure LW-10 to the affidavit of Laura Willoughby filed on 1 December 2021
That is the extent of the evidence about the respondent’s financial position. The respondent did not comply with the applicant’s request to produce profit and loss statements and balance sheets, which documents would have given the applicant (and now the Court) a greatly enhanced picture of the respondent’s true financial circumstances. Moreover, the evidence before the Court is that the respondent remains registered.
In any event, it is well established that the size and financial circumstances of a respondent does not excuse breaches of workplace laws. Any concerns about the respondent’s capacity to pay must be weighed against the objective of general deterrence. As noted by Heerey J in Jordan v Mornington Inn Pty Ltd [2007] FCA 1384 at [99]:
As to the respondent’s own financial position, however, in considering the size of a penalty, capacity to pay is of less relevance than the objective of general deterrence…In any event, to the extent that financial hardship might mitigate what would otherwise be an appropriate penalty, such an argument would need to be based on evidence.
As noted above, there is a paucity of contemporary evidence directed at the respondent’s financial position or capacity to pay. In any event, even if there was evidence to support the submission advanced by the respondent, that consideration must be balanced against the need for penalties to be set at a rate which achieves general deterrence.
Deterrence
The applicant submitted that a failure to comply with a compliance notice must carry meaningful consequences and must not be considered as an “alternative” that allows an employer to avoid obligations which are the subject of those notices. I accept that submission.
In relation to specific deterrence, notwithstanding the respondent’s repeated assertion that it has ceased trading, the respondent remains registered and there is no evidence before the Court about its activities and in particular whether or not it is employing any staff. As such, a penalty needs to be imposed at a level which would dissuade the respondent from engaging in similar breaches in future.
In addition, I accept the applicant’s submission that any penalty should also reflect the need for general deterrence in respect of non-compliance with statutory notices issued by a regulator.
Contrition, corrective action and cooperation
The applicant concedes that the respondent has cooperated in so far as it has made early admissions, consented to the making of a declaration and orders requiring the payment of the outstanding amount to the employee, and has agreed to a statement of agreed facts. This cooperation has limited the applicant’s and the Court’s time and resources in preparing for and determining a contested factual hearing. The applicant submits that it would be appropriate to apply a discount of 20% on the maximum penalty in the circumstances.
CONSIDERATION
Having regard to the above factors I find that it is appropriate for a penalty of $14,320 to be imposed. This is just over 43% of the maximum penalty for the contravention.
A penalty in this amount recognises the seriousness of the contravention, will have a deterrent effect, both specific and general, and is set at a level which imposes a significant consequence for a failure to comply with a compliance notice. It also takes into account the respondent’s cooperation with the applicant at a relatively early stage of the litigation, although recognising that at the time of the hearing, the full amount owing to the employee (a significant amount) was still outstanding.
On balance, I find that a penalty in this amount properly balances the range of factors to which the Court must have regard and about which submissions have been made and does not require any further recalibration in order to avoid it having a crushing or oppressive impact on the respondent.
CONCLUSION
I accordingly make the orders set out at the commencement of these reasons.
I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Symons Associate:
Dated: 2 June 2022
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