Fair Work Ombudsman v Wy Pty Ltd

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v WY PTY LTD & ORS

[2016] FCCA 3432

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

Legislation:

Fair Work Act 2009 (Cth), ss.44, 45, 323(1), 545, 546, 550(2)

Applicant:

FAIR WORK OMBUDSMAN

First Respondent:

WY PTY LTD ACN 140 944 369

Second Respondent:

CHONG YEW CHUA

Third Respondent:

NING YUAN FU

File Number:

BRG 786 of 2016

Judgment of:

Judge Vasta

Hearing date:

8 December 2016

Date of Last Submission:

8 December 2016

Delivered at:

Brisbane

Delivered on:

8 December 2016

REPRESENTATION

Solicitors for the Applicant:

Fair Work Ombudsman

Counsel for the Respondent:

Mr Mackey

Solicitors for the Respondent:

Gadens Lawyers

ORDERS

THE COURT DECLARES THAT:

The First Respondent contravened the following civil remedy provision:
(a)Section 44 of the FW Act, by failing to give each of the Employees the Fair Work Information Statement, as prescribed by s.125(1) of the FW Act;
(b)Section 45 of the FW Act, by failing to advise Ms Hung of her employment category at the time of her engagement with the First Respondent, as prescribed by clause 10.2 of the Fast Food Award;
(c)Section 45 of the FW Act, by failing to advise each of the Employees in writing of their respective classifications according to the structure set out in Schedule B to the Fast Food Award, as prescribed by clause 16.2 of the Fast Food Award;
(d)Section 45 of the FW Act, by failing to pay each of the Employees the minimum rates of pay as prescribed by clause 17 of the Fast Food Award;
(e)Section 45 of the FW Act by failing to pay each of the Employees the required casual loading, as prescribed by clause 13.2 of the Fast Food Award;
(f)Section 45 of the FW Act, by failing to pay each of the Employees the required loading for all ordinary hours worked on a Saturday, as prescribed by subclause 25.5(b) of the Fast Food Award;
(g)Section 45 of the FW Act, by failing to pay each of the Employees the required loading for all ordinary hours worked on a Sunday, as prescribed by subclause 25.5(c)(ii) of the Fast Food Award;
(h)Section 45 of the FW Act, by failing to pay each of the Employees the required rate for all hours worked on a public holiday, as prescribed by clause 30.3 of the Fast Food Award;
(i)Section 45 of the FW Act, by failing to pay each of the Employees a special clothing allowance, as prescribed by subclause 19.2(b)(ii) of the Fast Food Award; and
(j)Subsection 323(1) of the FW Act, by failing to pay each of the Employees in full.
The Court declares that the Second Respondent was involved, within the meaning of subsection 550(2) of the FW Act, in the contraventions committed by the First Respondent, as set out in subparagraphs 1(d) to 1(j) above.
The Court declares that the Third Respondent was involved, within the meaning of subsection 550(2) of the FW Act, in each of the contraventions committed by the First Respondent, as set out in paragraph 1 above.

THE COURT ORDERS THAT:

The First Respondent pay penalties in the sum of $116,250.00 pursuant to subsection 546(1) of the FW Act for its contraventions set out in paragraph 1 above, and pursuant to subsection 546(3)(a) of the FW Act, to pay its respective penalty amounts to the Consolidated Revenue Fund of the Commonwealth within 28 days of the Court’s order.
The Second Respondent pay penalties in the sum of $20,000.00 pursuant to subsection 546(1) of the FW Act for his involvement in the contraventions set out in paragraph 1(d) to 1(j) above, and pursuant to subsection 546(3)(a) of the FW Act, to pay its respective penalty amounts to the Consolidated Revenue Fund of the Commonwealth within 28 days of the Court’s order.
That the Third Respondent pay penalties in the sum of $7,000.00 pursuant to subsection 546(1) of the FW Act for his involvement in the contraventions set out in paragraph 1 above, and pursuant to subsection 546(3)(a) of the FW Act, to pay its respective penalty amounts to the Consolidated Revenue Fund of the Commonwealth within 28 days of the Court’s order.

BY CONSENT THE COURT ORDERS THAT:

The First Respondent be made, pursuant to subsections 545(1) and/or 545(2)(a) of the FW Act, that the First Respondent will, when advertising for positions of employment with the First Respondent that are covered by the Fast Food Awards within 2 years following the date of these Orders, clearly specify in English in the body of the advertisement that:
(a)The First Respondent and the advertised position are covered by the Fast Food Award;
(b)The First Respondent is bound by the FW Act; and
(c)Prospective employees can contact the Applicant at its Fair Work Infoline on 13 13 94, either independently or through the Translating and Interpreting Service on 13 14 50.
Pursuant to subsections 545(1) and/or 545(2)(a) of the FW Act, that the First Respondent provide, to any person who commences or proposes to commence employment with the First Respondent in a period within 2 years following the date of these Orders, the Fair Work Information Statement (as prepared pursuant to subsection 124(1) of the FW Act):
(a)In a manner permitted by regulation 2.02 of the FW Regulations; and
(b)In the language of the prospective employee’s or employee’s choice, where it is published by the Applicant on its website.
The Applicant has liberty to apply on 7 days’ notice in the event that any of the preceding orders are not complied with.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 786 of 2016

FAIR WORK OMBUDSMAN

Applicant

And

WY PTY LTDACN 140 944 369

First Respondent

CHONG YEW CHUA

Second Respondent

NING YUAN FU

Third Respondent

REASONS FOR JUDGMENT

(Ex tempore)

By application filed in this Court on 29 August 2016, the Fair Work Ombudsman seeks declarations and the imposition of pecuniary penalties against the three Respondents.
The facts of the matter have been very usefully put to writing and submitted before me in the document labelled Agreed Statement of Facts. It is some 22 pages long. I am not going to go through that document, however, in short compass, I will recite the salient facts.
The First Respondent was a company that had entered into a franchise arrangement with a franchisor to establish a number of fast food type restaurants, according to the definition under the modern award.
Those establishments were in the Westfield Chermside shopping complex; one in the old part, one in the new part; and there was another shop that was at Indooroopilly. So in running those three businesses, the First Respondent did employ a number of people.
The two employees the subject of this proceeding were a Ms Hung and a Mr Huan. Both of them applied for employment through separate job advertisements that were published online. These job advertisements were not advertisements made by any of the three Respondents, but were commissioned by a third party.
The third party would put the ad online. If people responded and that third party thought they were suitable applicants, they would then put them in touch with the employer, and the employer would then decide whether or not they would hire them.
In this case, both Ms Hung and Mr Huan answered the ads, were introduced then by that third party to the employer and ended up working for the employer. It is obvious when one looks at the ads, and I must say I am only looking at the translation, because the ads were in Mandarin, it does seem as though the ads did target people who were here on a working holiday and had a working holiday visa.
Because of the requirements of such a visa, that is you can work only a certain number of hours and you can only work for the one employer for no more than six months, such employment with an employer, such as the First Respondent, would be attractive.
The Second Respondent is the director of the First Respondent. In effect, he is the business, however, it’s almost as if he now runs the business by remote control, because he is not resident in Australia and is living in China.
The Third Respondent is an employee of the First Respondent, and he answers to the Second Respondent. The duties of the Third Respondent are really to keep records of the business and to provide payslips to the employees and make sure that they are paid in accordance with those payslips.
It is not his decision as to whether or not a particular payment or rate is to be set. That is a decision of the Second Respondent. The Third Respondent, without meaning any disrespect at all to him, is somewhat of a functionary, however, he is a very important part of the business and obviously the business could not function if he were not doing his job.
Ms Hung was employed by the First Respondent from 4 February 2015 to 12 August 2015, a period of approximately six months, and Mr Huan was employed from 12 March 2015 to 12 August 2015, which is a period of approximately five months.
Ms Hung was paid a flat rate of $15.60 from 4 February to 28 March and a flat rate of $16.40 an hour from 29 March 2015 to 12 August 2015. She was not paid any amount for casual loading; not paid any additional pay for work performed on Saturdays, Sundays or public holidays and not paid any amount as far as her special clothing allowance. That allowance is an amount given so that she can wash the uniform given to her by her employer.
Mr Huan was paid the flat rate of $15.60 from 12 March 2015 to 23 May 2015 and $16.20 from 24 May 2015 to 12 August 2015. He was not paid any amount for casual loading or any additional pay for work performed on Saturdays, Sundays or public holidays or any additional amount to wash the uniform.
Both Ms Hung and Mr Huan made a request for assistance to the Fair Work Ombudsman after their employment had ceased. The Fair Work inspectors diligently went about their duties and the First Respondent, through the Second and Third Respondents, also complied in all respects of whatever requests that were made of them by the Fair Work Ombudsman.
What was discovered through the investigations were that the minimum rates of pay that the Respondents had to pay both employees from 1 July 2014 to 30 June 2015 was $18.52 an hour and then from 1 July 2015 to 30 June 2016 the sum of $18.99 an hour. As can be seen, that is a significant difference from the flat rate that was paid to the employees.
Those award rates are then the basis upon which one calculates casual loading, Saturday pay, Sunday pay and holiday pay. With regard to just the flat rate aspect, Ms Hung was underpaid $2,362.18 during her time and Mr Huan was underpaid $1,741.84 during his time.
As I said during the hearing, that is the most serious of all the contraventions, notwithstanding that the quantum of other contraventions is greater.
Using those figures as a base, one can look at what should have been paid for casual loading and those sums dwarf the sums that I’ve just mentioned, because there should have been a $4.53 loading until 30 June 2015 and then a $4.75 an hour loading.
Therefore, when one looks at the quantum, for not being paid the loading is concerned, Ms Hung was underpaid $4,287.00 and Mr Huan was underpaid $2950.05.
The Saturday loading was $4.53 to 30 June 2015 and from 1 July 2015 $4.75.That meant that there was an underpayment of $776.04 to Ms Hung and $457.75 in relation to Mr Huan.
The Sunday loading, which was inclusive of casual loading, meant there should have been an extra $13.89 per hour paid up until 30 June 2015 and $14.25 from 1 July. That meant that Ms Hung was underpaid $1,785.89 in respect of that and Mr Huan $1,043.11 in respect of that aspect.
The public holiday rates up to 30 June 2015 were $50.93 an hour and then from 1 July $52.23 an hour. That meant that Ms Hung was underpaid $1,578.85 in respect of that aspect and Mr Huan was underpaid $1,120.46 in relation to his time.
There was also a failure to pay a special clothing allowance. The First Respondent was required to pay the employees a special clothing allowance of $1.25 per shift if they were required to launder any special uniform, dress or other clothing. Each of the employees was required to wear the uniform of the franchisor, which was a distinctive Hanachi uniform. They were required to launder their own Hanachi uniform at their own expense, and they were not paid a laundry allowance.
During the respective employment periods Ms Hung was entitled to be paid $201.25 in respect of this aspect and Mr Huan $167.50 in respect of this aspect.
There was an amount that was deducted from each of their wages, $40.00, in respect of a fortnightly pay period from 29 March 2015 to 11 April 2015 for Ms Hung and $50.00 in respect of the same period in relation to Mr Huan. This was some form of deposit on the uniforms and that contravenes a section of the Fair Work Act 2009 (Cth) that their pay was to be paid in full and at least monthly.
So when one adds all that up, Ms Hung was underpaid $11,011.21 and Mr Huan $7,480.71. That’s a total gross underpayment of $18,491.92.
The Respondents have admitted their respective liability to those seven breaches. There are a further three breaches that the First and the Third Respondent have accepted liability for and they are a failure to provide a Fair Work information statement to both employees upon their commencement of work, a failure to advise both employees of their employment category and a failure to advise both employees of their classification.
So those are, as Mr O’Brien put it, contraventions of conditions, whereas the other seven were contraventions of underpayments. The aggravating factor with regard to the underpayment contraventions comes from the fact that the First Respondent was audited by the Fair Work Ombudsman back in 2012.
In an exhibit to the affidavit of Ms Horell, which has been very nicely tabulated for me, it shows (at tab 42) that on 11 January 2012 the Fair Work Ombudsman wrote to the Second Respondent as principal of the First Respondent.
The Fair Work Ombudsman spoke of the audit findings and said this in the letter:
“The Fair Work Ombudsman has determined the following, based on the sample of employment records that you’ve provided at our request: that you have contravened section 45 of the Fair Work Act.”
And the FWO spoke of the requirement to take further action.
There was some further correspondence, which then ended in another letter on 28 February 2012 being sent to the Second Respondent as principal of the First Respondent, which says that the completion of the audit has occurred and that there was a gross underpayment in relation to matters, that they looked at, of $420.36. The Fair Work Ombudsman noted that they understood that such had since been rectified, that there was other contraventions of weekend penalty rates, but there was no financial disadvantage and so there was no further action taken.
But in both letters there was important information given to them as to the National Employment Standards and the FW Act and of their needing to be in compliance with those standards.
Now, that in and of itself, should have been sufficient to put the First and the Second Respondent on notice. In July 2013, other correspondence was sent to the Second Respondent from the Fair Work Ombudsman, which was a pay and conditions guide for the Fast Food Industry Award 2010. This gave a number of tables showing the rates that applied after 1 July 2013, and one just needed to look at that to be able to see what the applicable rate was after July 2013.
I note that such correspondence was given to the Second Respondent really on behalf of the First Respondent. I ought to have said with regard to that first letter, that was sent in January 2012, it spoke about the non-compliance for the particular worker and noted that, at that time, they were being paid a rate of $15.60, and it was noted throughout the letter that the Fair Work Ombudsman was telling the First and the Second Respondent that this was an incorrect rate of pay.
The emails that were sent between the Fair Work Ombudsman and the First Respondent through the email address were answered, on my looking at the evidence, by the Third Respondent showing that he knew the history of the matter and that certainly the company had to comply with the National Employment Standards. And, more importantly, the rate of $15.60, even back in 2012, was an incorrect rate.
When one then takes into account that both Ms Hung and Mr Huan started off in their employment being paid at the base rate of $15.50, that, to my mind, is an aggravating circumstance.
The question then is “where does the penalty sit in the scheme of things?”. There are a number of matters that I do have to take into account. Often in cases such as this there is reference made to a very helpful list that Judge Mowbray, when he was a Federal Magistrate, compiled in the Pangaea case. I’ve had regard to all of those matters in ascertaining what the penalty needs to be.
I will not go into each and every one of those circumstances; firstly, because there is no need to do so; and, secondly, that list should never be looked at as some form of checklist so that the Court is applying an almost rigid tick-a-box method by which one uses some form of mathematical formula to derive what is the appropriate level of liability for a particular company or respondent in these matters. The authorities talk about such an approach needing to be deprecated.
The following areas are of significance to me. Whilst this may not be a particularly large business it is not a small business either. It was operating three separate commercial outlets at the time. It did have, whether it actually utilised, but it did have the assistance of a franchisor to assist in these matters and more importantly it did have a warning from the Fair Work Ombudsman that they did have to comply with the National Employment Standards and were given the 2013 rates of the Fast Food Industry Award.
Nevertheless, it is as if the First and Second Respondent, and by association the Third Respondent, totally ignored this and simply paid what it was they thought that they could pay. There was much debate during this hearing as to whether matters should be called aggravating features or non-aggravating features, or how I should treat certain circumstances. As I’ve said, the only aggravating feature I see here is the warning that was given back in 2012. What is of note though is that Ms Hung and Mr Huan are vulnerable employees.
They are that for this reason: firstly, English is not their first language and in fact English is not a language, it would seem, with which either of them can communicate except for the very basic needs. Secondly, they do not have any form of cultural background that would be commensurate with the Australian background of industrial relations and Fair Work. It is difficult for them to be able to understand that they do have rights under our industrial relations system and more importantly that if their rights that they do have were infringed, that there are ways and means by which they can enforce those rights.
In the end, even though it was sometime after their employment had finished, they were able to look after themselves and ask the Fair Work Ombudsman for assistance, the point is that these are workers who are at the minimum wage level and it is incumbent upon employers having charge of vulnerable employees to ensure that their rights are respected. If that doesn’t occur then we have injustices given to those who are the most vulnerable in the workplace. Therefore the element of deterrence is quite a powerful factor in the setting of penalties here.

In the end, I have looked at what are the appropriate levels for these matters. As I’ve previously said, the first contravention, that is a failure to pay the minimum rate of pay, is the most serious contravention. I have had regard to the history of this matter dating back to the warnings in 2012, the information given to the Respondents in 2013, all of the surrounding circumstances for that particular contravention and that the maximum penalty for the Respondents would be $51,000.00.
Having regard to the serious aspect of this, as I’ve pointed out, I would set the appropriate penalty for this contravention at $40,000.00.
For the failure to pay casual loading, failure to pay Saturday loading, failure to pay Sunday loading, failure to pay public holiday rates, those are all corollaries of the failure to pay the minimum rates of pay. I would set the penalties for each of those contraventions at $20,000.00.
The failure to pay the special clothing allowance I would set at $10,000;00
The failure to pay in full the money, (that is when the money was deducted for the deposit), I would set at $5,000.00.
The contravention in failing to provide the Fair Work information statement, the failure to advise employees of the employment category and failure to advise the employee of their classification, I do not see those contraventions in as serious a light as the underpayment ones.
This is because if the underpayments had not occurred, whilst there may well have been the failure to advise an employee, failure to provide the Fair Work information statement, there would have been no particular detriment. Notwithstanding there may have been a contravention, the fact is that in this case the employer, and I will get to this soon, did keep very good records, did provide payslips, did keep all the sorts of records that ought to have been kept except for some handwritten timesheets (that I note they didn’t keep for the amount of time that they ought), but the fact is that those hours worked and so on are easily able to be ascertained by the payslips.
It is important that those sorts of records, such as payslips and hours worked, are kept and the Respondents did do what they were supposed to, so I do not see that these breaches are in the same category.
For the failure to provide the Fair Work information statement I would set the penalty at $10,000.00.
For each of the other two the penalties I will set are $5000.00.
That gives a total of $155,000.00. What has been quite evident in this case is that the First Respondent has cooperated fully with the Fair Work Ombudsman.
There was rectification of the underpayments that was made very quickly. The two complainants have been repaid in full and that was, as I say, done very promptly. There has been full cooperation with the Fair Work Ombudsman. The matter has never been prepared for trial.
There has been an, in effect, agreement that the orders that the Fair Work Ombudsman has asked for to be made as far as declarations are concerned ought be made. It is very hard to see what else the First Respondent, Second Respondent, and I will get to the Third Respondent later, could have done to have speed this matter along any more than what they have.
For that reason, I propose a very large discount of 25 per cent. That would mean that with regard to the First Respondent, I would order that the First Respondent pay pecuniary penalties for the 10 contraventions in the sum of $116,250.00.
With regard to the Second Respondent, the Second Respondent realistically is the company, though for the reasons I’ve spoken already, he is not liable for the latter three contraventions, but is liable for the former seven categories. I can see really no good reason not to give the same penalties as the company, however, in the appropriate proportion.
Therefore, for the first contravention I would impose a penalty of $8,000.00.
For contraventions 2, 3, 4 and 5 a penalty of $4,000.00 for each contravention.
For contravention 6 a penalty of $2,000.00
For contravention 7 a penalty of $1,000.00.
That is a total of $27,000.00. I also, for the same reasons, feel a discount of 25 per cent ought be given and then just a small discount after that to round the figure off. I therefore order that the Second Respondent pay pecuniary penalties for these contraventions in the sum of $20,000.00.
With regard to the Third Respondent, he is in a totally different category. He is not the real arm of the category. He is not the person who is behind the curtain when one tears down the corporate veil. He is an employee who was responsible for the provision of payslips and the keeping of records.
It is of note that the letters and discussions in 2012 and 2013 by the Fair Work Ombudsman to the First and Second Respondents were directed through the Third Respondent, so the Third Respondent certainly had the knowledge.
The Third Respondent carried out the wishes of the Second Respondent in relation to what happened to the Third Respondent. In effect, the Third Respondent was following orders.
There has been some submissions as to whether there was a defence. There may well have been an arguable defence for this. Whether that would have been successful in the end is not really the point. The fact is that having an arguable defence and deciding not to follow through with it and instead accept what he had done really is again a mark of someone who is being truly remorseful and truly contrite.
He, along with the First and Second Respondents, issued apologies to the two complainants. Using the same form of approach, I have looked at what the proportionate or commensurate penalty would have been if the third respondent had been as it were the real entity behind the corporate veil. Using the same formula that I had utilised with regard to the Second Respondent that would have meant that the penalty for the Third Respondent would have been in the order of $28,050.00, but, as I say, he is not in that category.
In looking at what I ought do I’m of the view that I ought do is look at what would be his overall responsibility, and I have decided therefore that his liability would be 25 per cent of what it would have been if he had been the power behind the corporation. Therefore I discount that $28,050.00 to a total of $7,013.00, but I will give the $13 off, so it would be a total of $7,000.00.
Therefore, I will order that the Third Respondent pay pecuniary penalties in the sum of $7,000.00.

I certify that the preceding seventy (70) paragraphs are a true copy of the reasons for judgment of Judge Vasta

Date: 10 February 2017

[2016] FCCA 3432

8 December 2016

Key Legal Topics

Areas of Law

Employment Law

Legal Concepts

Penalty

Statutory Construction