Fair Work Ombudsman v Western Chinese Language School Incorporated
[2025] FedCFamC2G 298
•6 March 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Western Chinese Language School Incorporated [2025] FedCFamC2G 298
File number: MLG 383 of 2024 Judgment of: JUDGE CHAMPION Date of judgment: 6 March 2025 Catchwords: FAIR WORK – Compliance Notice
FAIR WORK – Reasonable belief – Section 716(1)(a) – Whether the Inspector reasonably believed that the employer had contravened terms of a modern award – Where the Compliance Notice did not specify each and every contravention but “roved” across a date range throughout a relevant period – Where the court held that employer’s system of conduct in paying a flat rate less than prescribed Award minimums was sufficient grounds for the Inspector’s reasonable belief that the contraventions occurred throughout the relevant period
FAIR WORK – Review of the Compliance Notice –Section 717(1)(a) – Whether the employer had not committed a contravention set out in the Notice because the modern award, the Social, Community, Home Care And Disability Services Industry Award 2010 did not apply to it – Where held that a community language school was an employer in the social and community services sector and the Award applied to it
FAIR WORK – Section 717(1)(b) – Whether the Notice set out “specified action to remedy the direct effects of the contravention” under s. 716(2)(a) – Whether the Notice set out “brief details” of the contravention under s. 716(3)(c) –Held Notice complied with ss. 716(2)(a) and 716(3)(c) –Where the court found that the First Respondent failed to comply with the notice under s. 716(5)
FAIR WORK – Accessorial liability – Where under s. 716(2)(a) the Inspector may require a person to take specified action “within such reasonable time as is specified in the notice” – Where an officer of the FWO made an express representation that the First Respondent should not make payments at the time specified in the notice – Where the failure to comply with the Contravention Notice was a continuing contravention – Where the Second Respondent was an intentional participant in the contravention
Legislation: Fair Work Act 2009 (Cth) ss. 90, 550, 706, 716, 717
Miscellaneous Award 2020
Social, Community, Home Care and Disability Services Industry Award 2010
Explanatory Memorandum, Fair Work Bill 2008 (Cth)
Cases cited: Brammer v Deery Hotels Pty Ltd (1974) 22 FLR 276
Ezy Accounting 123 Pty Ltd v FWO (2018) 360 ALR 261; [2018] FCAFC 134
Fair Work Ombudsman v ANSA Finance Pty Ltd [2022] FedCFamC2G 833
Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365
Fair Work Ombudsman v Grouped Property Services Pty Ltd (2016) 152 ALD 209; [2016] FCA 1034
Fair Work Ombudsman v Pure Telecom Pty Ltd [2024] FedCFamC2G 664
Federal Commissioner of Taxation v Australia and New Zealand Banking Group Limited (1979) 143 CLR 499
George v Rockett (1990) 170 CLR 104; [1990] HCA 26
Hana Express Group Pty Ltd v Fair Work Ombudsman (2020) 350 FLR 359; [2020] FCCA 54,
Health Services Union v Catering Industries (NSW) Pty Ltd [2023] FCAFC 82
Jones v Lorne Sawmills (1962) 3 FLR 234
Kucks v CSR Ltd (1996) 66 IR 182
Kuredale Pty Ltd v Fair Work Ombudsman [2021] FCCA 332
McKinnon v Secretary of Department of Treasury (2006) 228 CLR 423; [2006] HCA 45
Nguyen and Le v Vietnamese Catholic Community in SA Inc [2019] SAET 68
Nguyen v Vietnamese Catholic Community in SA Inc trading as Dac Lo Vietnamese Ethnic School [2021] FCA 231
R v Phong Hoang Nguyen (2013) 117 SASR 432
Ross v The Queen (1979) 141 CLR 432
The King v Central Reference Board; Ex parte Thiess (Repairs) Pty Ltd (1948) 77 CLR 123
Division: Division 2 General Federal Law Number of paragraphs: 147 Date of last submissions: 22 January 2025 Date of hearing: 20–22 January 2025 Place: Melbourne Counsel for the Applicant: Ms N Campbell Solicitor for the Applicant: Fair Work Ombudsman Counsel for the First Respondent: Mr M Garozzo Solicitor for the First Respondent: Irwell Law Second Respondent: In person ORDERS
MLG 383 of 2024 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: WESTERN CHINESE LANGUAGE SCHOOL INCORPORATED (ABN 15 081 290 240)
First Respondent
BAOQUAN CHEN
Second Respondent
ORDER MADE BY:
JUDGE CHAMPION
DATE OF ORDER:
6 MARCH 2025
THE COURT DECLARES THAT:
1.The First Respondent contravened s 716(5) of the Fair Work Act (FW Act) by failing to comply with the compliance notice issued on 12 September 2022.
2.The Second Respondent was involved, within the meaning of s 550(2) of the FW Act, in the First Respondent’s contravention of s 716(5) of the FW Act.
THE COURT ORDERS THAT:
3.The First Respondent’s application for a review of the compliance notice under s. 717(1) of the FW Act is dismissed.
4.The proceeding is listed for a hearing as to remedy, penalties and any other consequential matter on 1 May 2025 (on an estimate of 1 day).
5.On or before 4.00 pm on 3 April 2025 the Applicant file an outline of submissions and any evidence on which it relies as to the hearing as to remedy, penalties and any other consequential matters.
6.On or before 4.00 pm on 17 April 2025 the Respondents file an outline of submissions and any evidence on which they rely as to remedy, penalties and any other consequential matters.
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 CHAMPION:
INTRODUCTION
The Fair Work Ombudsman (FWO, the Applicant) alleges that Western Chinese Language School Inc (WCLS, the First Respondent) has failed to comply with a Compliance Notice (Notice) under s. 716(5) of the Fair Work Act 2009 (Cth) (FW Act). WCLS denies the allegation, and as is set out below, has brought an application for review of the Notice.
The FWO further alleges that Mr Baoquan Chen (the Second Respondent), then Chairperson of WCLS’ School Council, was knowingly involved in the contravention and is therefore taken to have contravened s. 716(5) of the FW Act. Mr Chen denies that he was involved in any contravention.
WCLS is a Chinese community language school. It teaches Victorian curriculum Chinese language programs and approved Certificate of Education (VCE) Chinese language programs to pre-school and school aged students on Saturdays during school terms. Its curriculum extends to Chinese culture which is integral to language learning. Predominantly, but not exclusively, its students have Chinese heritage.
FWI Zhang, the Fair Work Inspector who issued the Notice, gave evidence that she reasonably believed that WCLS was paying four of its employees a flat rate on a Saturday less than minimums prescribed in the Social, Community, Home Care and Disability Services Industry Award 2010 (the SCHADS Award). Under s. 716(1), an inspector’s reasonable belief as to a contravention of a term of a modern award or provision of the National Employment Standards is a prerequisite to an issue of the Notice. WCLS contends that there was not an objective basis for FWI Zhang to hold the requisite reasonable belief.
As noted, WCLS has also made an application for review of the Notice under s. 717(1)(a) and (b) of the FW Act. It alleges that the SCHADS Award did not apply to it and, therefore, under s. 717(1)(a) it has not committed a contravention set out in the Notice. In its review application WCLS further argues under s. 717(1)(b) that the Notice did not comply with the requirement to set out “specified action to remedy the direct effects of the contravention” under s. 716(2)(a) because the Notice required actions which exceeded the scope of s. 716(2)(a) and did not set out “brief details of the contravention” under s. 716(3)(c).
SUMMARY OF THE OUTCOME
I have found that WCLS failed to comply with the Notice under s. 716(5). I will dismiss WCLS’ application for review under s. 717(1). Mr Chen was involved in the contravention and is taken to have contravened s. 716(5). My reasons follow.
THE COMPLIANCE NOTICE
On 12 September 2022, FWI Zhang issued the Notice. The Notice is Appendix A to these reasons.
FWI Zhang set out in the Notice that she reasonably believed that WCLS had contravened provisions of the Award as to WCLS’ failure to pay — under a modern award, namely the SCHADS Award — minimum :
(a)part-time Saturday rates;
(b)casual Saturday rates; and
(c)public holiday rates.
The Notice set out that it was issued in relation to four named employees of WCLS: Ms Ling Zhuang, Ms Weihong Zhao, Ms Ying Tan and Ms Yuehua You (collectively, the Employees). It set out that the contraventions were in relation to the “Employees’ employment periods between 1 October 2016 and 30 June 2021”.
The Notice also set out that FWI Zhang reasonably believed that WCLS had contravened s.90(2) of the Act — a provision of the NES — because it had not paid accrued and untaken annual leave to Ms Zhuang when her employment ended on 5 December 2020.
WHAT ARE THE ISSUES FOR DECISION?
The following five issues arise for decision:
(1)Did the SCHADS Award apply to WCLS and the Employees?
(2)Was the Notice invalid because there was not an objective basis for FWI Zhang under s. 716(1)(a) to “reasonably believe” that WCLS had contravened a provision of the NES or a term of the SCHADS Award?
(3)Did the Notice not comply with s. 716(2)(a) because its required WCLS to take remedial action which exceeded the limits of “specified action to remedy the direct effects of the contravention”?
(4)Did the Notice not comply with s. 716(3)(c) because it did not set out the “brief details” of the contravention? and;
(5)Was Mr Chen - the Second Respondent - “involved” in the contravention within the meaning of s. 550 of the Act?
I have sequentially dealt with those five issues.
ISSUE 1: DID THE SCHADS AWARD APPLY TO WCLS AND TO THE EMPLOYEES?
It was common ground that if the SCHADS Award did not apply to WCLS the Notice should be cancelled with retrospective effect at least as to the Award contraventions
Under s. 717(1) WCLS applied for review of the Notice on both of the following grounds:
(a) the person has not committed a contravention set out in the notice;
(b) the notice does not comply with subsection 716(2) or (3)
Under s. 717(3) on a review “the court may confirm, cancel or vary the notice after reviewing it.”
If the SCHADS Award did not cover or apply to WCLS, it was common ground that the appropriate order under s. 717(3) would be for the court to “cancel… the notice after reviewing it” with retrospective effect in so far as it concerned Award breaches. The common position followed as a necessary consequence of the parties’ recognition that if the SCHADS Award did not cover or apply to WCLS, WCLS would not have committed the Award contraventions set out in the notice under s. 717(1)(a).
Legal principles as to award construction
The proper construction of a term of an award depends upon a consideration of the words used in the term, having regard to any relevant context and purpose (Kucks v CSR Ltd (1996) 66 IR 182, 184). Further, in Kucks Madgwick J said at 184:
…. meanings which avoid inconvenience or injustice may reasonably be strained for.
…
But the task remains one of interpreting a document produced by another or others. A court is not free to give effect to some anteriorly derived notion of what would be fair or just, regardless of what has been written into the award. Deciding what an existing award means is a process quite different from deciding, as an arbitral body does, what might fairly be put into an award. So, for example, ordinary or well-understood words are in general to be accorded their ordinary or usual meaning.
What are the relevant coverage provisions of the SCHADS Award and what is the relevant test?
The FWO submitted that as a community language school, the SCHADS Award covered WCLS under c. 4.1(b) because WCLS operated in the “social and community services sector” as defined in clause 3.1.
Under Clause 4.1(b) of the SCHADS Award provided:
4.1 This industry award covers employers throughout Australia in the:
…
(b) social and community services sector;
Clause 3.1 of the SCHADS Award defines “social and community services sector” as follows:
social and community services sector means the provision of social and community services including social work, recreation work, welfare work, youth work or community development work, including organisations which primarily engage in policy, advocacy or representation on behalf of organisations carrying out such work and the provision of disability services including the provision of personal care and domestic and lifestyle support to a person with a disability in a community and/or residential setting including respite centre and day services
[Emphasis added]
What is the relevant test?
Latham CJ set out the test to answer the question as to whether an enterprise operates in a particular sector in The King v Central Reference Board; Ex parte Thiess (Repairs) Pty Ltd (1948) 77 CLR 123 at 135 (recently applied in Health Services Union v Catering Industries (NSW) Pty Ltd [2023] FCAFC 82, [52] –[94]):
…. the question to be asked is— What is the substantial character of the industrial enterprise in which the employer and employee are concerned?”
Other decisions
I was told (and accept) that there was no binding judicial authority which would decisively resolve the Award coverage issue. There is a decision of the South Australian Employment Tribunal. In Nguyen and Le v Vietnamese Catholic Community in SA Inc [2019] SAET 68 at [39] Leischke DP found that the SCHADS Award applied to teachers at a Vietnamese community language school. Leischke DP said at [39]
In my view there is no grammatical or contextual reason to apply a narrow or restrictive application of the definition. In my view the school’s function is not just educational. Its educational activities are narrowly focused on the Vietnamese spoken and written language and its culture, and are not conducted in a mainstream registered school. The linguistic work is complemented by the Moon Festival cultural focus. The Vietnamese textbook is based on the Vietnamese culture. The school clearly promotes both the Vietnamese language and culture. The work of the school is a service to the broader ethnic Vietnamese community in Adelaide and to the respondent, which is a community-based association.
On an appeal against the SAET decision, White J noted at [19] that “the applicants do not contend that Lieschke DP had been incorrect in finding that it was the Social Services Award which governed their employment” but Leischke DP’s Award coverage finding was not the contested subject of the appeal (Nguyen v Vietnamese Catholic Community in SA Inc trading as Dac Lo Vietnamese Ethnic School [2021] FCA 231 at [19]).
What was the evidence?
It was common ground that in addition to, or perhaps more accurately as an integral part of its language education work, WCLS’ employees taught and its students participated in cultural activities such as dance, painting, travel, calligraphy and cooking.
It was also common ground WCLS was not a mainstream school. It was not registered or accredited by the Victorian Registration and Qualifications Authority (VRQA). The four named employees were not Victorian Institute of Teaching (VIT) registered teachers. The work of WCLS complemented mainstream school language education.
A number of critical documents in the evidence before me support the conclusion that the substantial character of WCLS’ enterprise was in the social and community sector. The State of Victoria (Department of Education and Training) entered into a funding agreement with WCLS for it to provide an out-of-school hours Chinese language program that:
complements language education provided by mainstream schools, with a particular focus on enabling students to maintain their mother tongue or heritage language.
As to WCLS “substantial character” I was referred to its constitution, its Annual Information and Statement to the Australian Charities and Not-For-Profit’s Commission (ACNC) and its Annual Report.
First, WCLS’ constitution set out its purposes as:
1.Providing Chinese language and culture services for local community members;
2.Providing a communication platform for people of different cultural backgrounds;
3.Encouraging local young people to understand each other in cultural learning experience.
Second, its ACNC annual information statement said as to a “description of the charity’s activities and outcomes”
Advancement of Chinese language education, and advancement of Chinese culture and other activities
Third, WCLS’ annual financial report recorded that:
the school is the Chinese language school the main purpose of which is to promote Chinese language & cultural activities
What is my analysis?
I accept that the words “social and community services sector” are very broad. Having regard to the definition in cl. 3.1, “the provision of social and community services” including “community development work” are also very broad concepts. WCLS submitted that “for the purposes of defining the sector … it obviously does not encapsulate any service that intersects with the community”.
As a community language school WCLS’s substantial character is to be engaged in community development work in the community services sector on the “ordinary and usual meaning” of those words. With regard to each of the critical documents to which I was taken “complementing language education provided by mainstream schools” (Funding Agreement), “encouraging local young people to understand each other in cultural learning experience” (WCLS’ Constitution) and “advancing Chinese culture and other activities” (ACNC annual information statement) all constitute community development work in the social and community services sector. The development of language and culture is within the ambit of the ordinary or usual meaning of the words community development work.
WCLS relied on the other forms of work referenced in the inclusive definition of social and community services sector including “social work, recreation work, welfare work, youth work… the provision of personal care and domestic and lifestyle support” which it is submitted “connote[d] something conceptually distinct from the services provided by the School” and, in effect, narrowed the breadth of the meaning of the words “social and community services sector”. The list of work is inclusive and non-exhaustive. I see no reason to read down the definition so as to exclude a community language school when the substantial character of its enterprise is within the ambit of the social and community services sector within the ordinary and usual meaning of the words.
WCLS submitted that WCLS is in the education sector, not the social and community services sector. Contrary to Kucks, this submission starts with an “anteriorly derived notion of what is fair and just” rather than with an interpretation of the ordinary and usual meaning of the words in the SCHADS Award.
I am fortified in my analysis by the decision in Nguyen, undisturbed on appeal, which concluded that the SCHADS Award covered and applied to a community language school.
Finally, I note that cl. 4.8 of the SCHADS Award countenances a situation in which more than one award applies to an employer that the most appropriate Award will apply. Clause 4.8 provides that:
4.8 Where an employer is covered by more than one award, an employee of that employer is covered by the award classification which is most appropriate to the work performed by the employee and to the environment in which the employee normally performs the work.
Although there was some passing reference in the evidence to the Miscellaneous Award 2020, it was no part of WCLS’ case that the SCHADS Award did not apply because more than one award applied and a classification under another award, whether an education award or otherwise, was the “most appropriate” classification for the Employees.
The SCHADS Award applied to WCLS and the four named Employees. I note that if I concluded that the SCHADS Award covered and applied to WCLS there was no dispute that the employees performed work in a classification under the SCHADS Award.
WCLS has not proved that there is any reason to cancel or vary the Notice under s. 717(1)(a) because it has not committed a contravention set out in the Notice because the SCHADS Award did not cover or apply to it.
ISSUE 2: DID THE INSPECTOR HAVE A REASONABLE BELIEF THAT THE EMPLOYER HAD CONTRAVENED A PROVISION OF THE AWARD AND A TERM OF THE NES?
The inspector’s reasonable belief is a prerequisite to the issue of the notice
Contextually, s. 706(1)(a) provides that “an inspector may exercise compliance powers (other than a power under s 715 or 716) for determining whether this Act or a fair work instrument is being, or has been, complied with”. It follows that an inspector is not entitled to use the s. 716 power to find out whether an Award or the Act has been complied with. Under s. 716(1)(a) and (b) a prerequisite to the exercise of the statutory power to issue a compliance notice is that the inspector “reasonably believes that a person has contravened …. a provision of the National Employment Standards or a term of a modern award”.
The contravention as to which the inspector holds the reasonable belief under s. 716(1) is the same contravention as the contravention in s. 716(2) and (3)
Sections 716(1), (2) and (3) ought not be read in isolation one from the other. Statutory provisions are “given a construction that will render them harmonious” (Ross v The Queen (1979) 141 CLR 432, 440). The “contravention” as to which the inspector must hold a reasonable belief in s. 716(1) is the same contravention as to which the “specified action” is directed in s. 716(2) and as to which “brief details” must be given under s. 716(3).
Proving the inspector’s reasonable belief is an integer of proving contravention of s. 716(5)
The FWO submitted that if it did not establish that FWI Zhang held a reasonable belief it would not have established that WCLS failed to comply with a notice given “under this section” under s. 716(5) and, as a result, I would dismiss the FWO’s application (T230:L44). Noting that the issue as to FWI Zhang’s reasonable belief arose as an issue under s. 716, not as an issue under the s. 717 review, suffice to say the FWO proceeded on the basis that proving the inspector’s reasonable belief was a necessary integer of proving a contravention of s. 716(5).
What are the legal principles as to reasonable belief?
There is both a subjective and objective element to a reasonable belief (Hana Express Group Pty Ltd v Fair Work Ombudsman (2020) 350 FLR 359; [2020] FCCA 54, [20]–[23]). As to its objective element, which was the issue before me, it is not relevant whether the inspector “thinks he or she has reasonable grounds” (McKinnon v Secretary of Department of Treasury (2006) 228 CLR 423; [2006] HCA 45, [10]).
In George v Rockett (1990) 170 CLR 104; [1990] HCA 26 the High Court held that a reasonable belief “requires the existence of facts which are sufficient to induce that state of mind in a reasonable person” (Rockett, 112). A reasonable belief may exist “on more slender evidence than proof”. It is an “inclination of the mind towards assenting to, rather than rejecting a proposition”. Finally, “depending on the circumstances” it may “leave something to surmise or conjecture’ (Rockett, [116]. Accepting that a reasonable suspicion is something less than a reasonable belief, in R v Phong Hoang Nguyen (2013) 117 SASR 432 at [22] the Full Court said as to reasonable suspicion:
It is not reasonable to suspect the existence of facts on flimsy material or by a process of reasoning which relies on tenuous, albeit rational, connections. On the other hand, it would be unreasonable, and would deny the power much of its utility, to demand material which supports a positive belief in the existence of the relevant facts.
[Footnote omitted]
What is my analysis?
FWI Zhang set out at the beginning of the Notice that she reasonably believed that WCLS had contravened terms of the SCHADS Award and a provision of the NES (see Appendix A). FWI Zhang set out two tables (Table 1 and Table 2) which set out the “details of contraventions” of the Award and the NES.
The OneDrive folder
Before FWI Zhang issued the Notice there had been detailed correspondence exchanged between WCLS and FWI Zhang. WCLS had provided substantial documentation to the FWO as to the Employees’ hours worked, as to whether the Employees were part-time or casual employees and wage rates paid.
Because FWI Zhang no longer works with the FWO, the correspondence was exhibited to FWI Williams’ affidavit. FWI Williams was not cross-examined. FWI Williams deposed that on 26 July 2021 Mr Chen had sent an email which contained a link to a “one drive folder” which contained detailed employment records for the Employees.
Among other matters, in the link to the OneDrive folder, there was material as to the Employees’ Saturday rates of pay. Illustratively, Ms Tan’s employment contract recorded her Saturday rate of pay at “$36.54 /hr (Sat)”.
The OneDrive folder contained detailed records of hours the Employees worked. There was information that, in 2017, Ms Tan worked approximately 35 Saturdays for 3 hours each Saturday. Reproducing only part of the table for the purpose of illustrating the point, the “OneDrive” information for Ms Tan’s Saturday work in 2017 appeared as follows:
Date (2017) Day of the week Hours in AM Hours in PM Total hours 4-Feb Sat 3 0 3 11-Feb Sat 3 0 3 18-Feb Sat 3 0 3 Omitted dates: 4 March–11 November [omitted hours 84] 18-Oct Sat 3 0 3 25-Nov Sat 3 0 3 2-Dec Sat 3 0 3 9-Dec Sat 3 0 3 Total 105
There were similar records as to the other Employees. As a result, before she issued the Notice, as to part-time Saturday work, FWI Zhang had evidence than each of the four employees worked regular Saturdays and were paid a flat rate at a level less that the Award minimums prescribed ranging across the compliance notice period from 1 October 2016 until 30 June 2021.
As to casual rates for Saturday work, WCLS had provided material to Ms Zhang before she issued the Notice that two of the Employees had agreed to be engaged on a casual basis in 2021. WCLS had provided documents to the FWO that it had paid the employees at a flat rate below the SCHADS Award minimum rates on Saturdays for casual employees.
As to underpayment for public holidays, FWI Zhang had material that the Employees had worked on (Saturday) ANZAC Day, 25 April 2020 and that WCLS had paid the Employees a “flat rate” less than the prescribed minimum public holiday rate in the SCHADS Award.
In summary, before she issued the Notice, FWI Zhang had material that WCLS’ system of conduct during the compliance notice period spanning 1 October 2016 until 30 June 2021 was to pay the Employees a flat hourly rate for their work on a Saturday which was insufficient to meet SCHADS Award minimums for a part-time employee or a casual employee. The flat rate was also insufficient to meet the public holiday rate Award minimum. Such evidence as was before FWI Zhang as to the Employees having worked on public holidays in the relevant period was confined to the single instance of ANZAC Day 2020.
The Reasonable Belief Document
FWI Zhang adopted a considered process before the issue of the Compliance Notice.
On 9 September 2022 (three days before she issued the Notice) FWI Zhang completed a document titled “Reasonable Belief Document” which collated and considered the information available to her.
In her Reasonable Belief Document (among other matters) she noted that WCLS had provided evidence and records including as to rates of pay, work patterns and WCLS’ system of a flat rate of pay in the assessment period between 1 October 2016 and 30 June 2021.
In the Reasonable Belief Document, FWI Zhang recorded her decision that she held a reasonable belief that WCLS had contravened award terms as to underpayment of the of minimum part-time Saturday rate (cl. 26.1), underpayment of the minimum Saturday rate for casual employees [cl. 26.4(a)] and underpayment of the minimum public holiday rate [cl. 34.2(a)]. She also recorded her reasonable belief that WCLS had contravened a provision of the NES as to non-payment of accrued and unused annual leave [s. 90(2)].
As to underpayment of annual leave, FWI Zhang referred to material that:
When their part time engagement ended at the end of each school year, the Employees were not paid out their accrued but unused annual leave and annual leave loading, which constitutes a contravention of 90(2) and clause 31.3(a).
In cross examination, the challenge to FWI Zhang’s evidence focused chiefly on the fact that FWI Zhang did not have material as to contraventions of the Award on each and every Saturday ranging across the relevant period between 1 October 2016 and 30 June 2021, defined as the Period in the Notice. FWI Zhang had evidence of a consistent pattern of Saturday work and WCLS’ consistent system of a flat rate of pay but she did not have evidence as to whether the Employees worked on Saturdays during the term school holidays or on Saturdays during the long summer break between the end of one school year and the start of the next.
Her evidence as to the Employees’ work on public holidays was confined to evidence of a single event, that the Employees had worked on (Saturday) ANZAC Day, 25 April 2020.
The issue was whether there was the existence of sufficient facts to induce the state of a reasonable belief in a reasonable person for FWI Zhang to form a reasonable belief that there was underpayment each and every Saturday — and each and every public holiday, throughout the relevant period — even though she did not have material as to every instance of the contravention.
Does the inspector’s reasonable belief have to be as to the particulars of each and every contravention or is it sufficient that the inspector may have a reasonable belief by reference to a system of conduct?
In terms of trying to capture the core of WCLS’ submission as to why it submitted FWI Zhang did not have a “reasonable belief”, at one point, WCLS submitted that FWI Zhang needed to have a “reasonable belief” as to each and every contravention. Each Saturday WCLS paid less than the Award minimum rate there was a separate contravention of the SCHADS Award. The Notice adopted what at one point was referred to as a “roving” form. It “roved” across a date range from 1 October 2016 to 30 June 2021 and detailed only that the contraventions fell within that date range. The Notice did not pinpoint or identify individual Saturdays in that date range when, technically, there was a separate contravention each Saturday.
The same point might be made about any public holiday other than Anzac Day 2020 which fell on a Saturday within the scope of the relevant date range.
In final submissions, I had the following exchange with counsel for WCLS (T270:L27–44)
HIS HONOUR: Is it not, though – can she not – is she able to go a step further and say, “Having regard to the fact that I know about Saturdays which were set out over more than a page, I have a reasonable belief that there’s a pattern of conduct by this organisation, that they pay a flat rate on a Saturday, they don’t pay penalty rates”, which is the – kind of the – leaves something to surmise or conjecture about a – “for those Saturdays I might not know specifically about, I have a reasonable belief that there was a contravention on those other Saturdays”.
COUNSEL :Not in my submission, your Honour.
HIS HONOUR: Yes.
COUNSEL :So if I can take you to - - -
HIS HONOUR: But does that divide you and [counsel for the FWO] … in terms of the battleground?
COUNSEL:I think so.
As noted, WCLS placed reliance on the fact that FWI Zhang did not have any information as to whether the Employees worked on Saturdays in “gaps” during term holidays or over the long summer holidays (T271:L25–3). It was submitted that FWI Zhang had to have a reasonable belief as to “each individual contravention” (T272:L39). WCLS submitted the absence of objective facts as to the “gaps” meant that the Notice was flawed because there was no objective material to support a reasonable belief for a contravention each and every Saturday across the relevant date range.
To a significant degree, WCLS’ complaint about FWI Zhang not having the required “reasonable belief” under s. 716(1) because of the Notice’s “roving” nature was the same complaint as to why it submitted the Notice did not comply with the requirement to set out the “specified action to remedy the direct effects of the contravention” under s. 716(2)(a) and its submission that the Notice did not set out “brief details of the contravention” under s. 716(3)(c). Because the Notice roved across a date range rather than particularising each individual contravention WCLS submitted the Notice did not comply with s. 716(2)(a) and s. 713(3)(c).
It is technically accurate to say that each Saturday WCLS paid the flat rate which was less than the award minimum there was a separate award breach.
I have come to the view that it was sufficient that FWI Zhang knew that there was a system of underpayment for her to have a reasonable belief that there were contraventions of the Saturday award minimum rates across the whole date range of the Notice — 1 October 2016–30 June 2021.
As to a system of conduct, in the course of a discussion of accessorial liability under s. 550, in Fair Work Ombudsman v Grouped Property Services Pty Ltd (2016) 152 ALD 209; [2016] FCA 1034 at [957] (approved in Ezy Accounting 123 Pty Ltd v FWO (2018) 360 ALR 261; [2018] FCAFC 134, [15]) Katzmann J said that:
where an alleged accessory is aware of a system producing certain outcomes, and those outcomes constitute contraventions of the Act, it is unnecessary to show that the alleged accessory knew the details of each particular instance of those outcomes in order to show the requisite knowledge. As I will explain, reasoning of that kind allows me to conclude that certain arrangements put in place by Rosario, such as the sham contracting arrangements, were knowing and intentional means of avoiding paying certain entitlements, such as penalty rates and leave loadings. Provided he knew, for example, that an employee covered by the sham contracting arrangements worked on weekends, Rosario could be knowingly concerned in GPS’s failure to pay penalty rates notwithstanding that he may never have known on which weekends and for how many hours the employee worked.
[Emphasis added]
Here I am concerned with whether FWI Zhang had a “reasonable belief” rather than whether an accessory was knowingly concerned in a principal’s contravention. I ought to be cautious in proceeding by analogy.
Nonetheless, I have found the meaning in Grouped Property Services to be of assistance. There was substantial material before FWI Zhang to reasonably “induce an inclination of the mind” (Rockett, [116]) to the fact that WCLS was not meeting its minimum award obligations as to Saturday rates of pay for the named part-time and casual employees because it had a system of paying a flat rate less than Award minimums. The system of conduct — regular Saturday work, payment of a flat rate less than the award minimums — was sufficient to underpin a reasonable belief which roved across the period 1 October 2016 until 30 June 2021 that each Saturday the Employees worked WCLS had contravened the Award even if FWI Zhang did not know the hours the Employees worked each and every Saturday or whether they worked in the “gaps” of term holiday times and the long summer holidays. FWI Zhang did not proceed on “flimsy material” or by reasoning which was “tenuous” (Phong, [22]). A reasonable belief “may leave something to surmise or conjecture” (Rockett, 116). To the extent that FWI Zhang surmised or conjectured that the system of conduct as to which she had material repeated on other Saturdays — even though she did not have proof of each particular instance — that did not detract from an objective foundation for her reasonable belief that WCLS had not paid the required Saturday rates across the whole period of the Notice.
For the same reasons, to the extent that FWI Zhang surmised or conjectured as to other public holidays that WCLS had paid a flat rate from what she knew had occurred on ANZAC Day 2020 that did not detract from her reasonable belief that WCLS had not paid the required public holiday rates across the whole period of the Notice.
It is sufficient for an inspector to have a reasonable belief from a “system” of underpayment that contraventions of the Award of the Act have occurred and it is not necessary that the inspector know the details of “each particular instance” (Grouped Property Services, [957], above). As the High Court said in Rockett, a reasonable belief may exist “on more slender evidence than proof”.
As to the breach of the NES, WCLS conceded that FWI Zhang had a reasonable belief that WCLS had contravened a provision of the NES by not paying accrued, unused annual leave at the end of each year of employment (T277:L24–27).
What is my conclusion as to reasonable belief?
I find that FWI Zhang had the requisite reasonable belief as to contraventions of the Award and the Act under s. 716(1) for the issue of the Notice across the Period of the Notice.
ISSUE 3: DID THE NOTICE REQUIRE WCLS TO TAKE “SPECIFIED ACTION TO REMEDY THE DIRECT EFFECTS OF THE CONTRAVENTION” IN COMPLIANCE WITH S. 716(2)(A)?
In its review application, WCLS alleges under s. 717(1)(b) that the Notice did not comply with s. 716(2)(a) which provides that an inspector may “give the person a notice requiring the person to … take specified action to remedy the direct effects of the contravention” (emphasis added).
If the Notice did not comply with s. 716(2)(a) it would be open to me to “cancel” or “vary” the notice under s. 717(3). It would be open to me to tailor any order varying the Notice to address the nature of the non-compliance.
The required action under the Compliance Notice as issued
Item 8 of the Compliance Notice set out the specified action required in the following terms:
Required action under this compliance notice
8.In accordance with section 716(2) of the FW Act, I require you by 14 November 2022 to:
Step 1 – calculate and rectify underpayments
(a) in respect of the contravention referred to in row (a) of the Table 1 above:
(i) identify each employee listed in Appendix A who was not paid (but was required by the Award to be paid) the Entitlement that is the subject of the contravention – the Entitlement is found in the ‘Details of contraventions’ column of the Table 1 above
(ii) in respect of each such employee identified:
1.identify the number of hours the employee worked during the Period in respect of which the Entitlement was required to be paid by the Award (Hours) – ignore this step if the Entitlement is not paid on an hourly basis;
2.identify the amount the Employer paid to the employee during the Period in respect of the Entitlement (having regard to the Hours, where applicable);
3.calculate the amount the Employer should have paid to the employee during the Period in respect of the Entitlement (having regard to the Hours, where applicable);
4.make a payment to the employee of the difference between the amount referred to in (a)(ii)(2) and the amount referred to in (a)(ii)(3) immediately above; and
5.make a record of the information and amounts referred to in (a)(ii)(1) to (a)(ii)(3) and the amount of the payment referred to in (a)(ii)(4) immediately above (Underpayment Rectification Information).
(b)repeat the same process described in Step 1(a) for each of the contraventions referred to in rows (b) to (c) of the Table 1 above.
The issue is whether that requirement to “calculate and rectify underpayments” by taking each of the five actions that made up Step 1 exceeded the limits of “specified action to remedy the direct effects of the contravention”.
Explanatory Memorandum
As to the width of the concept of “specified action to remedy the direct effects of the contravention” under s. 716(2)(a), I was referred to two examples drawn from the Explanatory Memorandum to the Fair Work Bill 2008 said to be illustrative of the line to be drawn between a notice which (permissibly) set out specified action to remedy the direct effects of the contravention and a notice which (impermissibly) required an employer to conduct an “audit” which would exceed the limits of remedying “direct effects”. A notice which required its recipient to take action which exceeded the limits of remedying the direct effects of the contravention would not comply with s. 716(2)(a).
The first example of a notice which does comply with s. 716(2)(a) was as follows (Ex Mem., [2684]) and permissibly specified action to remedy the direct effects was as follows:
An inspector reasonably believes that DDS Daycare has underpaid Darrin $100 to which he was entitled to under the modern award that applies to him.
In this scenario the inspector could give DDS Daycare a compliance notice that requires it to remedy the direct effect of the underpayment by paying $100 to Darrin instead of pursuing court proceedings.
The second example of a Notice which does not comply with s. 716(2)(a) because it impermissibly exceeded the limits of remedying direct effects was as follows (Ex Mem., [2687]):
An inspector reasonably believed that Katie G’s Bar had underpaid Aaron $250 that ‘he was entitled to under the Katie G’s Bar Enterprise Agreement 2010.
The inspector issued a compliance notice in relation to the contravention, requiring Katie G’s Bar to pay Aaron $250 to remedy the underpayment. The compliance notice also required Katie G‘s Bar to conduct an audit of all its employees‘ wage entitlements to make sure that it was not underpaying Aaron.
In this situation, Katie G’s Bar could seek review of the compliance notice on the ground that the notice did not comply with clause 716 because the requirement to audit its employees‘ wage records goes beyond remedying the direct effects of the contravention for which the notice was given.”
[Emphasis added]
The amendment to the legislation after the date of the Compliance Notice
For completeness, I note that s. 716(2) has been amended after the date of the Compliance Notice in this case (with effect from 27 February 2024) to insert additional words into s. 716(2)(a) as follows:
(2) The inspector may, except as provided by subsection (4), give the person a notice requiring the person to do either or both of the following within such reasonable time as is specified in the notice:
(a) take specified action to remedy the direct effects of the contravention referred to in subsection (1) (including to calculate and pay the amount of any underpayment);
[The insertion is in bold and italics]
The amendment to s. 716(2)(a) after the date of the Notice in this case does not assist in the resolution of the parties’ dispute.
What was WCLS’s submission?
WCLS submitted that the required action to calculate and rectify underpayments exceeded the bounds of “specified action to remedy the direct effects of the contravention”. WCLS submitted that s. 716(2)(a) ought not to be interpreted to empower an inspector to require an employer to take action for the purpose of determining “what the contravention is” or its particulars or require the recipient of a notice to “audit” itself. WCLS’s submissions were as follows:
The actions being required here amount to, in effect, an audit. They are not actions that may be required under s 716(2)(a). Instead of being directed at remedying the direct effects of any contraventions, the Compliance Notice purports to require that the School take action to identify for the inspector what the relevant contraventions, and the particulars of said contraventions, actually were.
WCLS described the high watermark of its submission that the Notice did not comply with s. 716(2)(a) as the requirement that WCLS “identify the number of hours the employee worked”. Relatedly, in a way which emphasises the interconnection between its submissions under s. 716(1) and 716(2), WCLS submitted that: “reasonably believing that… the award has been contravened by failing to pay an employee a Saturday rate on occasion, does not provide open slather in relation to the entire period of the employee’s employment”.
Relevant authority
There is limited authority as to the breadth of the phrase “specified action to remedy the direct effects of the contravention”. In obiter in Fair Work Ombudsman v Pure Telecom Pty Ltd [2024] FedCFamC2G 664 Judge Cameron said at [62]:
Pure Telecom had relevantly been required by the Compliance Notice to determine the amount it owed Mr Yang and then to pay it. It has not been suggested that a compliance notice may not be drawn in that way and, depending on the case, there are good arguments why such an approach is reasonable and appropriate. The significance of this is that failure to comply with such requirements stipulated in a compliance notice will amount to a contravention of that notice. In money cases, such as this one, the critical failure will be to have not paid the amount which correct calculations determine should have been paid. However, ultimately a compliance notice is a unity and a person “must not fail to comply” with it in its entirety: s.716(5).
[Emphasis added]
What is my analysis?
As I have already noted, the relevant “specified action to remedy the direct effects of the contravention” under s. 716(2)(a) is as to the same contravention in respect of which the inspector holds a reasonable belief under s. 716(1). I have reasoned that under s. 716(1) a notice might be issued as to period which sets out a start and end date, if the reasonable belief is based on a system of conduct of contraventions as to which the inspector held a reasonable belief even if inspector did not know every particular instance of the contraventions within the date range.
I interpret the phrase “specified action to remedy the direct effects of the contravention” as a single phrase and it should not be unduly parsed. There is no reason to give the words “specified action” anything other than their ordinary meaning. There is no reason to read narrowly the phrase “specified action” as being limited to the making of an underpayment. A requirement to identify hours worked, identify the amount paid, calculate the amount that should have been paid and paying the difference (each of the five actions the Notice prescribed) all come within the breadth of the ordinary meaning of the phrase “specified action”.
As to whether the “specified action is “specified action to remedy the direct effects of the contravention”, the relevant contravention is the contravention in respect of which the inspector had a reasonable belief in this case, the contravention as between two outer limit dates — 1 October 2016 and 30 June 2021 — where WCLS had a system whereby it paid a flat rate for Saturday work and thereby engaged in a system of conduct of underpayment of the Employees referable to SCHADS Award minimums. If, as I have found, the inspector was entitled to form a reasonable belief as to all Saturdays on the basis of a system of conduct the required remedial action – or curative action – directed to make good those contraventions was to identify hours worked, the amount paid, the amount that should have been paid and to pay the difference across the relevant date range. That is, the remedial action for the contraventions was as the Notice specified.
I can and do take into account of the broader statutory context that an employer’s recordkeeping obligations under s. 535 mean that the necessary information to take the “specified action” the Notice prescribed ought to be available to an employer from its records.
This Compliance Notice did not exceed the limits of direct action in the way set out in the second example in the Explanatory Memorandum as to Katie’s Bar because it was confined to the named employees as to specified contraventions (Saturday rates). It did not require an “audit” as to other employees or an “audit” as to contraventions of a different type.
I accept the FWO’s submissions in reply that:
WCLS was not required to identify the contraventions. Rather, it was required to identify how the Employees had been affected by the reasonably believed contraventions referred to and what their entitlements were.
The Compliance Notice complied with s. 716(2)(a).
ISSUE 4: DID THE COMPLIANCE NOTICE SET OUT BRIEF DETAILS OF THE CONTRAVENTION IN COMPLIANCE WITH S. 716(3)(C)?
Section 716(3) provides as follows:
(3) The notice must also:
…
(a)set out brief details of the contravention;
In the same way as I noted as to s. 716(2)(a) above, if the Notice did not comply with s. 716(3) on review it would be open to me to “cancel” or “vary” the notice under s. 717(3) and to tailor any order varying the Notice to address the nature of the non-compliance.
Section 716(3)(c) ought to be read in a coherent way together with s. 716(1)
Section 716(3)(c) ought to be read in a coherent way together with s. 716(1) and 716(2)(a). The Notice must set out “brief details” of the same contravention as to which the inspector held a reasonable belief under s. 716(1).
I accept WCLS’ submission that s. 716(3) is a procedural fairness provision. The “brief details” must be sufficient to accord to a recipient of a notice sufficient information to permit it to make an informed choice as to its response to the notice.
Relevant Authority
The parties noted that “brief details” does not mean “scant” details. It is also a phrase which stands in marked contrast to a phrase such as “full particulars”. In Kuredale Pty Ltd v Fair Work Ombudsman [2021] FCCA 332 Judge Kendall said at [73] that a notice did not need to provide an “explanation”. It was sufficient if there was a “brief description”. It “only needed to set out the critical facts and the relevant provision”. I agree.
I am cautious before proceeding by analogy by reference to other notices under other statutory regimes. Acknowledging that caution, in Federal Commissioner of Taxation v Australia and New Zealand Banking Group Limited (1979) 143 CLR 499 at 525 Gibbs ACJ said that to be valid a notice to produce documents under taxation legislation must “of necessity identify with sufficient clarity the documents which are required to be produced”. In the current context, the “brief details” in the Notice must identify the contravention with “sufficient clarity” so that the recipient may make an informed choice as to its response. A notice that sets out the critical facts and the relevant provision (Kuredale, above) will meet that minimum requirement.
Did this Notice set out the critical facts and the relevant provision? WCLS as the recipient of the Notice knew by reference to the “brief details” in the Notice that the issue was underpayment of Saturday rates for four named employees in the date range 1 October 2016 and 30 June 2021 by reference to identified provisions of the SCHADS Award. The Notice provided the critical facts and the relevant provision to permit WCLS to make an informed choice as to its response. The fact that the Notice did not particularise every instance of the breach but proceeded by reference to a date range does not mean it did not provided “brief details”.
The Compliance Notice complied with s. 716(3)(c).
ISSUE 5: IS THE SECOND RESPONDENT LIABLE AS AN ACCESSORY?
Mr Chen and the proceeding before me
Mr Chen, the Second Respondent, represented himself at trial. He had the assistance of an interpreter.
Despite orders and the rules, before trial Mr Chen did not file or serve a defence. The FWO did not take issue with Mr Chen’s non-compliance with the court’s interlocutory orders. The FWO submitted that I could accept Mr Chen’s position as he explained it in his oral submissions. (T294:L6–8).
Given a civil penalty was involved, Mr Chen had a privilege against penalties. He elected not to give evidence before me.
The FWO’s evidence established that Mr Chen was the Chairperson of WCLS. He was the person at WCLS who corresponded with the FWO as to the Notice.
Mr Chen’s submission that he was not an intentional participant in WCLS’s contravention and the sequence of events
Mr Chen submitted that he was not an intentional participant in WCLS’s contravention because the FWO had expressly told him on 14 November 2022 — the deadline for the specified action under the Notice which I repeat had been issued on 12 September 2022 — that WCLS should hold off making payments in accordance with the requirements in the Notice.
I note the following from the sequence of events.
On 12 September 2022, FWI Zhang emailed the Notice to WCLS at Mr Chen’s email address. Also, on 12 September 2022, FWI Zhang sent to WCLS and to Mr Chen “pay guides” as to the SCHADS Award. It transpired that the pay guides FWI Zhang sent were incorrect.
On 21 September 2022 Mr Chen responded that WCLS: “couldn’t accept the award mentioned in your email”.
On 28 September 2022 Ms Merritt of the FWO sent an email to WCLS, and specifically to Mr Chen, in which she wrote:
“The Compliance Notice requires the Employer to calculate and rectify the underpayment by 14 November 2022 and requires the Employer to provide evidence to the FWO of the rectification payment made to the Employee, by close of business on 21 November 2022”
On 7 November 2022 Mr Chen emailed Ms Merritt. He attached a spreadsheet setting out WCLS’s calculations in response to the Notice. On the face of things, as of 7 November 2022, WCLS was proceeding on the basis that the SCHADS Award applied to it and that it had underpaid the Employees for Saturday work and is calculations would enable the necessary payment of the difference.
On 11 November 2022 Ms Merritt advised Mr Chen that WCLS’s calculations were being reviewed.
On 14 November 2022 — the deadline for the action “specified in the notice” — there was a phone call between Ms Merritt and Mr Chen in which she told him (her file note was in evidence):
I said the FWI is looking at the calculations today and will follow up shortly and to hold off making payment if he hasn't paid yet... Bob [Chen] again said he needs the information in an email.
On 14 November 2022 Mr Chen emailed Ms Merritt:
We haven’t made the payment because we haven’t got the confirmation from FWO regarding the calculation of the underpayment.
So please let us know whether the calculation is approved by FWO ASAP.
On 15 November 2022 Ms Merritt emailed Mr Chen:
The review of the calculations is still being undertaken and we will provide a response as soon as possible. While we note that the due date for payment was Monday, 14 November 2022, no action will be undertaken by the Fair Work Ombudsman in relation to the compliance notice while the calculations are under review.
On 9 December 2022 FWI Zhang emailed Mr Chen. She wrote (among other matters):
I refer to the email which was sent to you on 12 September 2022 which followed the email in relation to the issuing of the Compliance Notice (CN) on the same date. That email attached a number of pay guides for the Social, Community, Home Care and Disability Services Industry Award 2010 (SCHADS Award) to assist you in undertaking the calculations required to comply with the CN. In undertaking a review of the calculations provided by Western Chinese Language School, it has become apparent that the incorrect pay guides were attached to our email and we apologise for any inconvenience this may have caused.
…
… Now attached are the relevant pay guides which set out the rates payable to these employees (taking into account the relevant premodern award classification for periods prior to 1 December 2020). You will need to review and update your calculations for each employee covered by the CN in light of any change in the appropriate rates. Alternatively you can use the FWO’s Pay and Conditions Tool to determine the correct rates for each of the employees.
Once you have reviewed your calculations, if it would assist, you can provide those calculations to the Fair Work Ombudsman before making any back payments to the employees covered by the CN.
FWI Zhang explained that the error had arisen because of complexities about the identification of the correct pay rates consequent on an equal remuneration order made by the Fair Work Commission which affected the SCHADS Award. FWI Zhang attached approximately 250 pages of the correct pay guides as to the period covered by the Notice.
As of 9 December 2022, there appeared good reason that WCLS had not made good any underpayments and not taken the action to “calculate and rectify” the underpayments under the Notice issued on 12 September 2022 even though the initial deadline was 14 November 2022. The FWO had expressly told WCLS to “hold off” on the payments.
It is important to note, however, that there ensued further correspondence after 9 December 2022 between the FWO and WCLS — and specifically Mr Chen — as to the Notice. It is not necessary to traverse the detail of all of that correspondence. It is, however, important to note that the endpoint of the correspondence was reached when on 13 November 2023 (some 11 months later) when WCLS declined to give the FWO an undertaking as to the Notice the FWO had requested on 26 September 2023.
In the intervening period, the FWO had at least twice required (30 January 2023 and 6 February 2023) WCLS to provide updated corrected calculations as to payments to be made to the Employees to be provided “without further delay”.
On 24 March 2023 Mr Chen emailed Ms Merritt in which he reiterated that WCLS did not consider that the SCHADS Award applied to their school.
On 26 September 2023 Mr Anson, Senior Fair Work Inspector, FWO sent a letter to Mr Chen seeking to bring matters to a head on the basis that WCLS would provide an undertaking that — if in another proceeding concerning another language school — the court found that the SCHADS Award applied to that other language school, WCLS would take the required actions set out in the Notice.
On 13 November 2023 Mr Chen 2023 provided WCLS’ substantive response to Mr Anson’s letter of 26 September 2023. Mr Chen wrote:
After organising a school council meeting recently, WCLS has made the following decisions …:
…, if all community language schools are covered by the Social, Community, Home Care and Disability Services Industry Award 2010 (SCHADS Award)… , WCLS would accept being covered by the SCHADS Award as well.
WCLS did not otherwise provide the undertaking to take the required actions set out in the Notice.
On 22 February 2024 the FWO commenced this proceeding. I am not aware of any other relevant events between 13 November 2023 and 22 February 2024.
The refusal of WCLS’ application to amend its defence and withdraw certain admissions
Referable to the sequence of events I have outlined above, at the outset of the hearing, WCLS made an application to file an Amended Defence and Cross-Claim and to withdraw admissions it had previously made that it did not take the specified actions set out in the Notice. It also sought to amend its defence to rely on the fact that — as of 14 November 2024, the deadline for the specified action set out in the Notice — there was an extant representation from the FWO that it was reviewing calculations and that WCLS ought not to make the payments until the review was complete. In short, WCLS sought, by way of the proposed amendments to its Defence and Cross-Claim, to rely on Ms Merritt’s statement to Mr Chen on the evening of 14 November 2022 that WCLS should “hold off making payment if [it] hasn’t paid yet.” The proposed amendment it was argued would give rise to a “reasonable excuse” under s. 716(5) for non-compliance with the Notice.
I did not grant permission to WCLS to make the requested amendments to its Amended Defence and Cross-Claim. I accepted the FWO’s submissions that it was too late for admissions to be withdrawn and that “forensic decisions” (T24:L15) had been made as to how the s. 717 review application had been defended and “this [was] simply an egg that cannot be unscrambled” (T24:L18). I determined that it was not in the interests of justice to permit the WCLS’ amendment application.
As events transpired, therefore, the circumstances are that Mr Chen (the Second Respondent) seeks to rely on a sequence of events to resist a finding that he was an intentional participant in a contravention, which events WCLS was unable directly to rely upon as the principal contravener because of the admissions it had made in its Defence at an earlier stage of the proceeding.
What are the relevant principles of accessorial liability?
In Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365 White J said at [176]:
In order to aid, abet, counsel or procure the relevant contravention, the person must intentionally participate in the contravention with the requisite intention: Yorke v Lucas (1984) 158 CLR 661 at 667. In order to have the requisite intention, the person must have knowledge of “the essential matters” which go to make up the events, whether or not the person knows that those matters amount to a crime: Yorke v Lucas at 667. Although it is necessary for the person to be an intentional participant and to have knowledge of the matters or things constituting the contravention, it is not necessary for the person to know those matters or things do constitute a contravention: Rural Press Ltd v Australian Competition and Consumer Commission [2002] FCAFC 213; (2002) 118 FCR 236 at [159]-[160]. That is to say, it is not necessary that the accessory should appreciate that the conduct in question is unlawful.
In the circumstances of Devine Marine, as to the “essential matters” which made up an award underpayment claim, White J observed at [191] that the accessory had to know that the employees performed work, that they did so as employees, that their work was governed by an industrial award, that the award stipulated minimum rates of pay and that the amount paid to the employees was less than minimum rates.
The essential matters as to non-compliance with the Notice under s. 716(5)
As to non-compliance with a Notice under s. 716(5) the essential matters that go to make up a contravention are: (1) that Mr Chen knew WCLS had received the Notice; (2) he knew that it had to be complied with; and (3) he knew that it was not complied with.
As to the first matter there is no real contest that Mr Chen knew that WCLS had received the Notice because he — on behalf of WCLS — subsequently corresponded with the FWO as to it.
As to the second matter, the terms of the Notice itself (Appendix A) set out that it must be complied with:
Failure to comply with this Compliance Notice may contravene a civil remedy provision and render you liable for a civil penalty (unless you have a reasonable excuse) See section 716(5) and 716(6) of the FW Act
As to the third matter, as set out above, Mr Chen sent the ultimate communication from WCLS dated 13 November 2023 which communicated — at least by necessary implication — that WCLS did not intend to comply with the Notice.
The issue of a Compliance Notice and the requirement to comply with it is not an inquiry as to whether the alleged substantive contravention of the underlying fair work instruments has been made out (see, i.e., Fair Work Ombudsman v ANSA Finance Pty Ltd [2022] FedCFamC2G 833, [148]–[152]). I have turned my mind to whether Mr Chen would have knowledge of the essential matters go to make up the contravention even if he had a genuine belief that the SCHADS Award did not apply to WCLS and therefore he expected WCLS s. 717 review would ultimately be successful. An accessory who expects the primary contravener’s s. 717 review to be successful but is ultimately disappointed in that expectation will still be taken to have contravened s. 716(5).
A continuing breach
Another element of s. 716(2)(a) not previously discussed in these reasons is that the Notice must specify a reasonable time for taking the relevant action. It is as follows:
Giving a notice
(2) The inspector may, except as provided by subsection (4), give the person a notice requiring the person to do either or both of the following within such reasonable time as is specified in the notice:
(a) take specified action to remedy the direct effects of the contravention referred to in subsection (1);
[Emphasis added]
The Notice complied with that requirement in that it required action:
“in accordance with section 716(2) of the FW act, I require you by 14 November 2022 to:
…
[Emphasis added]
There was no submissions that the requirement to take the actions by 14 November 2022 was not a reasonable time.
As previously set out, the Notice then proceeded to require its recipient to (among other matters) identify hours worked, the amount paid, the amount that should have been paid, calculate the shortfall and make good the difference for the Employees. The Notice also required reasonable evidence of compliance under s. 716(2)(b) to be provided by a specified date a week later on 21 November 2022.
As of 14 November 2022 — the time specified for the taking of the action — Mr Chen could not have been an intentional participant in any contravention of WCLS because he acted in accordance with the FWO’s extant and express direction to hold off making any underpayment until the FWO’s review of the calculations was complete.
There is no reason, however, for me to close my eyes to the parties’ dealings after 14 November 2022.
Until the FWO withdrew its extant and express direction, although the issue does not directly arise, it appears to me likely that WCLS may have had a “reasonable excuse” under s. 716(6) for not complying with the Notice. As of 13 November 2023 — when correspondence between the parties was exhausted — any reasonable excuse was spent.
The obligation to comply with the Notice under s. 716(5) was a continuing obligation. Non-compliance was a continuing breach.
Once the time specified in the Notice for action passed - absent a “reasonable excuse” there was a continuing breach so long as the Notice was not complied with. In the different context of the statute of limitations as to the commencement of actions for breach of an award in Brammer v Deery Hotels Pty Ltd. (1974) 22 FLR 276 Joske J cited an earlier decision of Jones v Lorne Sawmills (1962) 3 FLR 234 where Cussen J had said:
the breach of an award or non-compliance with an award, consisting of a failure to pay the amounts prescribed by the award, was a continuing breach which could be the subject of proceedings under s. 119 so long as the money remained unpaid, notwithstanding that a statute of limitations had run its course since the breach first occurred.
[Emphasis added]
In this case, there was a continuing breach as to the non-compliance with the Notice under s. 716(5) once the deadline for compliance had passed. Once Mr Chen sent his email of 13 November 2023 on behalf of WCLS, he knew that the Notice had not been complied with.
Whatever sympathy I may have as to the position of Mr Chen who submitted to me that he was a volunteer chairperson – whose role was to chair quarterly meetings of a community language school – he knew each of the essential matters that constituted the contravention under s. 716(5), namely: (1) Mr Chen knew WCLS had received the Notice; (2) he knew that it had to be complied with; and (3) he knew that it was not complied with. As a result, he was a knowing participant in the contravention and is taken himself to have contravened s. 716(5).
ORDERS
I will make a declaration that WCLS contravened s. 716(5) of the FW Act. I will make a declaration that Mr Chen was involved in WCLS’s contravention of s. 716(5) of the FW Act. I will dismiss WCLS’s review application. I will list the matter for a further hearing as to remedy, penalties and any other consequential issues.
I certify that the preceding one hundred and forty-seven (147) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Champion. Associate:
Dated: 6 March 2025
Appendix A
1
18
4