Fair Work Ombudsman v Yang

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FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 2)

Fair Work Ombudsman v Yang [2021] FedCFamC2G 247

File number(s): ADG 298 of 2020
Judgment of: JUDGE BROWN
Date of judgment: 11 November 2021
Catchwords: INDUSTRIAL LAW – FAIR WORK – Underpayment of two employees – Compliance Notice – penalty hearing – where respondent’s admit to the charges against them – calculation of penalty – first time offender – intuitive synthesis.
Legislation: Crimes Act 1914 (Cth), s 4AA
Evidence Act 1995 (Cth), s 191
Fair Work 2009 (Cth), ss 539, 546, 557, 701, 706, 712, 716, 717
Hair & Beauty Industry Award 2010
Cases cited: ACE Insurance Limited v Trifunovski (No 2) [2012] FCA 793.
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8.
Blandy v Coverdale NT Pty Ltd [2008] FCA 1533.
Fair Work Ombudsman v Darna Pty Ltd [2015] FCCA 709.
Fair Work Ombudsman v Kentwood Industries Pty Ltd (No 3) [2011] FCA 579.
Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151.
Fair Work Ombudsman v Matcraft Pty Ltd & Ors [2021] FCCA 272.
Kelly v Fitzpatrick [2007] FCA 1080 at [14]. (Tracey J).
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7.
Minister for Immigration & Citizenship v Li (2013) 249 CLR 332.
Mornington Inn v Jordan [2008] FCAFC 70.
Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412.
Veen v R (No 2) (1988) 164 CLR 465.
Division: Division 2 General Federal Law
Number of paragraphs: 119
Date of hearing: 21 June 2021
Place: Adelaide
Counsel for the Applicant: Ms Makris
Solicitor for the Applicant: Office of the Fair Work Ombudsman
Counsel for the Respondents: Mr Healy
Solicitor for the Respondents: Starke Lawyers

ORDERS

ADG 298 of 2020

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN:

FAIR WORK OMBUNDSMAN

Applicant
AND:

YI YANG ATF THE TRUSTEE FOR THE BESTIE HOUSE TRUST

First Respondent

XURUI ZHANG ATF THE TRUSTEE FOR THE BESTIE HOUSE TRUST

Second Respondent

ORDER MADE BY:

JUDGE BROWN

DATE OF ORDER:

11 NOVEMBER 2021

THE COURT ORDERS THAT:

1.The first respondent, Yi Yang and the second respondent, Xurui Zhang (hereinafter referred to as “the first respondent” and “the second respondent” respectively, and collectively referred to as “the respondents”) have contravened section 716(5) of the Fair Work Act 2009 (Cth) (hereinafter referred to as “the Act”) by failing to comply with the Compliance Notice issued by the applicant, the Fair Work Ombudsman (hereinafter referred to as “the applicant”) on or about 7 April 2020.

2.The first respondent pay a total penalty of $3,000.00 pursuant to subsection 546(1) of the Act for its contraventions set out in order (1) above.

3.The second respondent pay a total penalty of $3,000.00 pursuant to subsection 546(1) of the Act for its contraventions set out in order (1) above.

4.Pursuant to section 546(3) of the Act, that the pecuniary penalties ordered to be paid by the respondents in orders (2) and…

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Details
Case
[2021] FedCFamC2G 247
Decision Date

CaseChat Overview and Summary

In the Federal Circuit Court of Australia, the Fair Work Ombudsman (FWO) brought proceedings against Yang and Zhang, two business partners operating Bestie House, a beauty salon. The FWO alleged that Yang and Zhang underpaid their employees, Ms Han and Ms Shen, in contravention of the relevant industrial awards and the Fair Work Act 2009 (Cth). The respondents admitted to the charges against them. The primary issue before the court was the calculation of an appropriate penalty for each respondent under the Fair Work Act, taking into account the nature of the contraventions and the circumstances of the respondents.

The court followed the principles established in prior decisions, which outlined the steps to determine an appropriate penalty. The court identified the contraventions, considered whether they were part of a single course of conduct, and then assessed the gravity of the offending. The court noted that the respondents were first-time offenders and took into account their personal financial circumstances, which were modest. Despite the respondents' lack of proficiency in English and limited business experience, the court emphasised that compliance with industrial laws is mandatory regardless of a business's size or financial situation. The court concluded that the penalty should be significant enough to serve as a deterrent while being proportionate to the respondents' ability to pay.

After considering the factors of contrition, corrective action, and cooperation, the court determined that an appropriate penalty for each respondent was $3,000. The court recognised the respondents' late admission of liability and limited cooperation with the FWO but also acknowledged their disadvantage due to language barriers. The court rejected the FWO's argument for a higher penalty, finding that the imposed penalties were sufficient to achieve general deterrence and send a clear message to small businesses about the importance of compliance with industrial laws. The court ordered that the penalties be paid to the Commonwealth, as the FWO had funded the prosecution.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

These submissions are fleshed out in the Affidavits, which each of the Respondents has filed. Neither Ms Yang nor Ms Zhang were required for cross-examination by the FWO. In these circumstances, in the absence of any evidence in rebuttal, the Respondents’ Affidavit material is to be accepted by the court, unless it appears inherently unreliable or otherwise unsatisfactory. THE RESPONDENTS’ EVIDENCE Ms Yang is a qualified nail technician. She was born in China and came to Australia, in her early-20s, to study marketing. She is single and lives in rented accommodation. Ms Zhang was also born in China and came to Australia, for her secondary education, as a 16 year old. She is a qualified eyelash extension technician. The parties met in late-2018 and decided to go into business together, given their complementary skills, in the beauty industry. Each of them found it difficult to find other areas of employment. I accept that neither is proficient in English and they did not have business experience, when they commenced Bestie House. The Respondents divide the profits of the business between them on an equal basis. In its first year of operation, the business generated an operating profit, after tax, of approximately $21,000.00 for each of them. The clientele of Bestie House is mainly Chinese women, many of whom who are tertiary or advanced education students studying in Adelaide, who speak English as their second language. Ms Yang and Ms Zhang converse with their customers, mostly in Mandarin, but each has some English language skills. Ms Zhang has deposed that, in the past, she has done the basic administration work for the business, which she does out of hours, as she is needed to be available to provide beauty treatments during regular hours. She does not have any specific book keeping or business skills. It is the Respondents’ evidence that they work long hours to keep the business going. Ms Zhang also deposed that the business has been severely impacted by the Covid-19 pandemic, as there are no longer any Chinese overseas students utilising its services. Her accountant indicates that her taxable income for the financial year ending 30 June 2020 was just under $11,000.00. Ms Yang’s income was the same. There has been no improvement in the income in the most recently completed year. Ms Zhang is married and lives in rented accommodation, with her husband, who is a telephone technician earning approximately $45,000.00 per annum. Their rent is $24,960.00 per annum. It is the evidence of both respondents that they are living at a subsistence level.LEGAL PRINCIPLES APPLICABLE TO PENALTY The approach, which the court is required to take, in respect of these contravention proceedings, has been delineated in a number of decisions of the Federal Court.[27] The process can be summarised as follows:·The court should identify each separate contravention, arising from a breach of either the applicable Award or the FWA itself. Pursuant to section 539(2) each such contravention is a distinct incident for penalty purposes;·The court should determine whether any of these incidents arise in a single course of conduct, within the terms envisaged by section 557(1); ·Then give consideration as to whether any of these contraventions contain elements and factor this into considering what is an appropriate penalty, in all the circumstances, for each contravention;·Thereafter, the court should fix an appropriate penalty for each single or group contravention, taking into account all relevant circumstances; ·Finally, the court should apply the totality principle. This final step constitutes a review of the aggregate penalty thus far calculated and envisages a consideration of whether such a penalty is an appropriate response to the conduct, which lead to the various contraventions in question. This case has been described as a process of intuitive synthesis.[28][27] See Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151 at [42] (Mansfield J), citing Fair Work Ombudsman v Kentwood Industries Pty Ltd (No 3) [2011] FCA 579 at [10] (McKerracher J). [28] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8 at [55] (Graham J).

Decision

Reasons for decision

In these circumstances, I adopt the comments of Driver FM (as his Honour then was) in Rajagopalan v BM Sydney Building Materials Pty Ltd as follows:Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to the Court’s consideration of penalty.[39][39] Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at [27] (Driver FM).CONCLUSIONS It has been said that the task of sentencing is one of the most difficult judicial tasks, as it requires the synthesis of competing considerations to arrive at a penalty, which is just and appropriate. Necessarily it is a process of intuitive synthesis. It is useful to think of it in terms of percentages, but sentencing is not a purely arithmetical process. The penalty to be imposed must be proportionate to the gravity of the offending. This provides the high water mark in respect of the range of penalty to be imposed before turning to any subjective factors which tend to mitigate the objective assessment of the offending. In my assessment, an appropriate penalty for each respondent is one of $3,000.00. This is a significant sum, in my view. I take into account that for each respondent it was a first offence and when measured against their individual financial circumstances, the penalty will represent a large impost. At the same time, the breaches represent a failure of the Compliance Notice system to achieve its objectives. As such, a message must be sent to small cottage-type industries of the importance of prompt and complete rectification of any breaches of the industrial safety net. The penalty imposed, in my view, is of sufficient moment to achieve the desired degree of general deterrence required. This will render each respondent to penalties less than those sought by the FWO, but the penalties in question cannot be regarded, in my view, as being either token or trivial, given the personal circumstance of each of the respondents. Importantly, as indicated above, they are of sufficient magnitude to provide general deterrence. Pursuant to section 546(3) of the Act, the court may order the payment of any penalty imposed to be paid to the Commonwealth; a particular organisation; or a particular person. In this case, the FWO seeks that the penalties be paid to the Commonwealth. Given the prosecution has been funded by the FWO, it is obviously appropriate that this course should be adopted. For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.

Ratio Decidendi

Legal Principle Established

It is a significant and mitigating factor that neither respondent has any prior involvement with the FWO, and has never been subject to any complaint by a former employee prior to the issues surrounding Ms Han and Ms Shen coming to light.Contrition, corrective action and cooperation with authorities The FWO issued its first Compliance Notice, following the complaints of Ms Han and Ms Shen in October 2019. The most concrete manner in which the respondents could have shown contrition, in my view, would have been by a prompt admission that the two women had not been paid correctly and the indication that steps were being taken to rectify this state of affairs. Similarly, there was no compliance with the second Notice, necessitating these proceedings. Again, notwithstanding the engagement of an accountant to calculate the amounts due, there was no corrective action taken to pay Ms Han and Ms Shen what they were due. Rather, what occurred was that the respondents sought to contest liability on the basis of their lack of comprehension of their obligations and their contention that the issue of the relevant Notice represented some form of unreasonable administrative over-reach on the part of the FWO. It is true that Mr Starke, on behalf of the respondents, did provide payment details to the FWO and did engage in correspondence to narrow the issues. However, the fact remains that the proceedings were issued; were then initially contested; and the issue of compliance was unsuccessful in achieving its principle objective, namely the correct payment of the two employees concerned without the necessity of proceedings. It was only on the day fixed for the liability hearing, that the respondents formally indicated that liability would not be contested. I accept that this obviated the need for a lengthy hearing and must necessarily have resulted in less imposition on the public purse. However, the admission came at an extremely late stage and, of itself, demonstrates a limited degree of contrition or cooperation with the FWO. Although, again, I recognise that the respondents are necessarily disadvantaged by their non-English speaking backgrounds in their engagement with authorities. The FWO resists the application of any discount to the penalties to be imposed because, from its perspective, it was still put to the expense of preparing for the penalty hearing. In this context, it relies on what was said by the Full Court of the Federal Court (Stone and Buchanan JJ) in Mornington Inn v Jordan,[33] namely: It is important to note that it is not a sufficient basis for a discount that the plea has saved the cost of a contested hearing – that would discriminate against a person who exercised a right to contest the allegations. A discount may be justified, however, if the plea is properly to be seen as willingness to facilitate the course of justice. Remorse and an acceptance of responsibility also merit consideration where they are shown.[34][33] Mornington Inn v Jordan [2008] FCAFC 70.[34] Ibid at [74] (Stone and Buchanan JJ).