Fair Work Ombudsman v Yes Insurance Group Pty Ltd
[2022] FedCFamC2G 694
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Yes Insurance Group Pty Ltd [2022] FedCFamC2G 694
File number(s): MLG 475 of 2021 Judgment of: JUDGE BLAKE Date of judgment: 25 August 2022 Catchwords: INDUSTRIAL LAW – failure to comply with a Compliance Notice issued under section 716(1) of the Fair Work Act 2009 (Cth) - admitted contraventions by the Respondents – amount of penalty to be imposed. Legislation: Corporations Act 2001 (Cth).
Fair Work Act 2009 (Cth) ss 12, 14, 539(2), 546(1), 550(1), 550(2), 687(1), 700, 701, 716(1), 716(2), 716(3), 716(5), 717.
Cases cited: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
Kelly v Fitzpatrick [2007] FCA 1080Division: Division 2 General Federal Law Number of paragraphs: 43 Date of hearing: 11 August 2022 Place: Melbourne Advocate for the Applicant: Mr Trindade Solicitor for the Applicant: Clayton Utz Advocate for the Respondents: Mr Burke Solicitor for the Respondents: Joseph Burke Law Pty Ltd ORDERS
MLG 475 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: YES INSURANCE GROUP PTY LTD (ACN 140 630 548)
First Respondent
EMMA RITA KIMONIDES
Second Respondent
ORDER MADE BY:
JUDGE BLAKE
DATE OF ORDER:
25 AUGUST 2022
THE COURT ORDERS THAT:
1.Pursuant to section 546(1) of the Fair Work Act 2009 (Cth) (‘Act’):
(a)the First Respondent pay a pecuniary penalty of $23,310 to the Commonwealth of Australia for its declared contravention of section 716(5) of the Act within 28 days of the date of this Order;
(b)the Second Respondent pay a pecuniary penalty of $4,662 to the Commonwealth of Australia in respect of her involvement in the declared contravention of the First Respondent of section 716(5) of the Act within 28 days of the date of this Order.
2.The Applicant have liberty to apply on seven days notice in the event that any of the preceding Orders are not complied with.
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 BLAKE:
On 16 December 2021, the Court made a Declaration that Yes Insurance Group Pty Ltd (‘Yes Insurance’) contravened section 716(5) of the Fair Work Act 2009 (Cth) (‘Act’) by failing to comply with a Compliance Notice dated 9 October 2020 issued to it by the Fair Work Ombudsman (‘Ombudsman’). The Court also declared that Emma Kimonides was involved within the meaning of section 550(2) of the Act in the contravention by Yes Insurance of section 716(5) of the Act.
Section 716(5) of the Act is a civil remedy provision. A pecuniary penalty may be imposed for a breach of section 716(5) of the Act. The sole issue before this Court is the amount of any penalty that should be imposed on the Respondents arising out of the Declarations made by the Court on 16 December 2021.
For the reasons that follow, I have decided to impose a penalty of $23,310 on the First Respondent and $4,662 on the Second Respondent.
The parties prepared a Statement of Agreed Facts for the purposes of the penalty hearing. I have considered that document. An Application Book was prepared by the Ombudsman in consultation with the Respondents for the penalty hearing. I have had regard to the material in the Application Book including the affidavit of Fair Work Inspector Andy Lam (‘Inspector Lam’) affirmed 18 June 2021, an affidavit of Clint O’Neil affirmed 13 September 2021, transcript of the hearing before me on 3 December 2021 and written submissions filed by both parties.
BACKGROUND
What follows is taken from the Statement of Agreed Facts.
The Ombudsman, is and was at all relevant times:
(a)a statutory appointee of the Commonwealth, appointed by the Governor-General by written instrument pursuant to section 687(1) of the Act;
(b)a Fair Work Inspector pursuant to section 701 of the Act; and
(c)a person with standing to bring these proceedings and to apply for Orders for contraventions of civil remedy provisions pursuant to section 539(2) of the Act.
Yes Insurance is and was at all relevant times:
(a)a company incorporated under the provisions of the Corporations Act 2001 (Cth);
(b)a 'constitutional corporation' within the meaning of section 12 of the Act;
(c)a 'national system employer' within the meaning of section 14 of the Act;
(d)a company carrying on a business providing insurance products to customers predominantly operating in the transport industry, located at Level 7, 222 Kings Way, South Melbourne VIC 3205 (‘the Business’); and
(e)by reasons of the facts agreed to in paragraphs 7(b) and 7(c) above, covered by the Act in respect of its employees.
Ms Kimonides is and was at all relevant times:
(a)a natural person capable of being sued;
(b)the sole director, secretary and shareholder of Yes Insurance;
(c)responsible for the overall operation, control and management of Yes Insurance and the Business; and
(d)responsible for ensuring that Yes Insurance complied with its legal obligations under the Act.
Inspector Lam is and was at all relevant times a Fair Work Inspector appointed by the Ombudsman under section 700 of the Act.
From about 7 September 2020 to 1 February 2021, Inspector Lam undertook an investigation into Yes Insurance’s compliance with Commonwealth workplace laws (‘the Investigation’) in respect of the Business.
The Investigation commenced following a request for assistance made to the Ombudsman by an employee of Yes Insurance at the time, Mr Taaef Hazari (‘Mr Hazari’), on 7 September 2020.
During the Investigation, Ms Kimonides communicated with Inspector Lam on behalf of Yes Insurance by telephone and using the email address of [email protected] (‘Business Email’).
As a result of the Investigation, Inspector Lam formed a reasonable belief, within the meaning of section 716(1) of the Act, that, at all relevant times during the period from 3 August 2020 to 9 October 2020 (‘Period’):
(a)Yes Insurance employed Mr Hazari;
(b)the Banking, Finance and Insurance Award 2020 (‘Award’), a modern award under the Act, covered and applied to Yes Insurance in respect to the employment of Mr Hazari;
(c)Mr Hazari was:
(i)engaged as a full-time insurance sales consultant to perform duties relevant to the classification of a level 3 employee under Schedule A of the Award;
(ii)to be paid on a monthly basis on the 25th of every calendar month;
(iii)not paid any wages in respect of his employment during the Period; and
(d)Yes Insurance contravened clause 15.1(a) of the Award by failing to pay Mr Hazari his minimum wage entitlements for ordinary hours of work in the Period (‘the Alleged Contravention’).
On 9 October 2020, Inspector Lam gave Yes Insurance and Ms Kimonides a notice pursuant to section 716(2) of the Act (‘Compliance Notice’) by:
(a)post to Yes Insurance's registered office address of c/-Ferella & Co Services Pty Ltd, 51 Sydney Road, Coburg VIC 3058 (‘Registered Office’); and
(b)email to the Business Email of Ms Kimonides.
Inspector Lam and Ms Kimonides discussed the requirements and timeframes of the Compliance Notice via telephone on 9 October 2020, 5 November 2020 and 6 November 2020.
The Compliance Notice required Yes Insurance to:
(a)remedy the direct effects of the Alleged Contravention by 9 November 2020 by taking the following specified action in respect of Mr Hazari (‘the Specified Action’):
(i)identify the number of hours Mr Hazari worked during the Period in respect of which the relevant entitlement was required to be paid by the Award (‘the Hours’);
(ii)identify the amount Yes Insurance paid to Mr Hazari during the Period in respect of the entitlement (having regard to the Hours, where applicable);
(iii)calculate the amount Yes Insurance should have paid to Mr Hazari during the Period in respect of the entitlement (having regard to the Hours, where applicable);
(iv)make a payment to Mr Hazari of the difference between the amount referred to in paragraph 16(a)(ii) above and the amount referred to in paragraph 16(a)(iii) above;
(v)make a record of the information and amounts referred to in paragraphs 16(a)(i) to paragraph 16(a)(iii) above and the amount of the payment referred to in paragraph 16(a)(iv) above (‘Underpayment Rectification Information’);
(vi)calculate and pay additional superannuation contributions required by clause 19.2 of the Award in respect of the amounts required to be paid to Mr Hazari by Yes Insurance as a result of the steps taken at paragraph 16(a)(i) to paragraph 16(a)(iv) above to the superannuation fund chosen by Mr Hazari;
(b)produce to the Ombudsman reasonable evidence of its compliance with the Specified Action as set out in paragraph 16(a) above by 16 November 2020, by producing:
(i)a schedule that set out the Underpayment Rectification Information in respect of the Alleged Contravention set out in paragraph 13(d) above, and the additional superannuation contributions calculated for Mr Hazari and paid in accordance with paragraph 16( a)(vi); and
(ii)proof that full payment had been made to Mr Hazari of the payment(s) required to be made, such as bank transfer receipts or a copy of Yes Insurance’s payroll records showing the payment(s) to Mr Hazari.
The Compliance Notice met the requirements of section 716(3) of the Act.
On 9 November 2020, Ms Kimonides emailed Inspector Lam an assessment prepared by Employsure of an amount of $4,263.37 (gross) owing to Mr Hazari in respect of 174.8 hours worked during the Period (‘Calculation’).
The Calculation did not include any calculation of the superannuation owed to Mr Hazari with respect to any unpaid wages and Yes Insurance did not make payment to Mr Hazari in respect of the Calculation or at all.
Yes Insurance did not:
(a)take the Specified Action by 9 November 2020; and
(b)produce to the Ombudsman evidence of compliance with the Compliance Notice by 16 November 2020.
By reason of the facts agreed in paragraphs 14 to 20 above, Yes Insurance admits that it failed to comply with the Compliance Notice and thereby contravened section 716(5) of the Act.
After the commencement of these proceedings on or about 24 April 2021, Yes Insurance:
(a)paid Mr Hazari the amount of $5,299.47 (gross) for 174.8 hours worked, and 18.05 hours of annual leave owed for the Period;
(b)paid an additional superannuation contribution in the amount of $503.45 to the superannuation fund, Future Super, however did not produce to the Ombudsman any calculations of the additional superannuation contributions paid as required by the Compliance Notice referred to in paragraphs 16(a)(vi) and 16(b )(i) above; and
(c)provided a pay slip of the amounts paid to Mr Hazari as set out in paragraphs 22(a) and 22(b) above and receipts for those payments.
By reason of the facts agreed to in paragraphs 8, 12, 14(b) and 15 above, Ms Kimonides at all relevant times:
(a)was responsible for ensuring that Yes Insurance complied with the Compliance Notice;
(b)had actual knowledge that the Compliance Notice was given to Yes Insurance, including the requirement that Yes Insurance comply with the Compliance Notice within the timeframe specified;
(c)had actual knowledge that Yes Insurance failed to comply with the Compliance Notice; and
(d)was an intentional participant in Yes Insurance’s failure to comply with the Compliance Notice.
By reason of the facts agreed to in paragraph 23 above, Ms Kimonides admits that:
(a)she was involved, within the meaning of section 550(2) of the Act, in the contravention by Yes Insurance of section 716(5) of the Act; and
(b)by reason of section 550(1) of the Act, she is taken to have contravened section 716(5) of the Act.
RELEVANT PRINCIPLES
Section 716(5) of the Act is a civil remedy provision. The Court has the power to impose a pecuniary penalty under section 546(1) of the Act.
In Kelly v Fitzpatrick [2007] FCA 1080, the Federal Court set out a list of non-exhaustive factors relevant to the imposition of penalties under the Act. More recently, in Australian Building and Construction Commissioner v Pattinson [2022] HCA 13, the High Court at [18] referred to these principles and also stated at [42] that penalties ‘are not retributive, but rather are protective of the public interest in that they aim to secure compliance by deterring repeat contraventions’.
I now turn to consider the various factors in this case relevant to assessing the appropriate penalty to be imposed. In doing so, I note that the maximum penalty that the Court could impose on Yes Insurance at the time of the contravention was $33,300. The maximum penalty that could be imposed on Ms Kimonides at the time of the contravention is $6,600.
NATURE, EXTENT AND CIRCUMSTANCES OF THE CONDUCT
The relevant contraventions in this case are a failure to comply with a Compliance Notice. Yes Insurance failed to comply with the Compliance Notice. Ms Kimonides was involved in that contravention. This is not a case where each Respondent has committed multiple contraventions of workplace laws.
Many decisions of this Court have referred to the regime for Compliance Notices, and the purpose of that regime. Among other things, the Compliance Notice regime provides an efficient mechanism for rectification of contraventions of the Act, particularly in relation to underpayments. A person who complies with a Compliance Notice cannot be the subject of contravention proceedings to which the Compliance Notice relates. While a Compliance Notice is issued on the basis of a reasonable belief formed by a Fair Work Inspector, a recipient of a Compliance Notice is able to seek review of the Notice under section 717 of the Act.
The subject matter of the Compliance Notice in this case arose out of a failure to pay an employee, Mr Hazari, his minimum wage entitlements. The Compliance Notice is dated 9 October 2020. Between 9 October 2020 and 3 March 2021, various communications passed between the Ombudsman and the Respondents. Despite those communications, the Compliance Notice was not complied with during this period. This was despite repeated assurances given by Ms Kimonides to the Ombudsman on 9 October 2020, 26 October 2020, 5 November 2020, 18 November 2020, 26 November 2020, 4 December 2020, 11 December 2020, 16 December 2020 and on other occasions. These facts lead me to conclude that the contravention was deliberate.
The Respondents sought to argue that the continued failure to comply with the Compliance Notice arose because Mr Hazari had ceased employment and failed to return information and/or equipment to the Respondents. It is clear from the material before me that Mr Hazari had refused to return information and/or equipment to Yes Insurance. Clearly, Mr Hazari ought to have returned what was not his. His failure to do so, however, does not provide a basis for Yes Insurance to ignore either the terms of the Act, or the Compliance Notice. There were other options available to the Respondents to obtain their equipment, of which they were aware when one reads the affidavit of Mr O’Neil. The fact that they were aware of those options underscores in my view, the conclusion that the contravention was deliberate. That the contravention was deliberate is also supported by evidence Ms Kimonides gave in an earlier hearing before me, where she stated that she had been advised by lawyers and another organisation that the Respondents needed to comply with the terms of the Compliance Notice. Despite that advice, the Compliance Notice was not complied with.
PREVIOUS SIMILAR CONDUCT BY THE RESPONDENTS
The Respondents contended that they have no history of a failure to comply with a Compliance Notice, and that they have never received a civil penalty. I accept that the Respondents have never been subject to a civil penalty for contraventions of the Act. I am unable to accept that the Respondents have no history of a failure to comply with a Compliance Notice. A different Compliance Notice to the one that is the subject of these proceedings was issued to Yes Insurance on 8 October 2020. The Respondents were required to comply with this compliance notice by Friday 6 November 2020. Inspector Lam’s evidence, which was not challenged, was that the rectification occurred sometime between 26 November 2020 and 11 December 2020, that is, after the date specified in the Compliance Notice. While there was non-compliance with the Compliance Notice dated 8 October 2020, proceedings were not commenced by the Ombudsman in that instance seeking the imposition of a penalty.
There is then the other matters deposed to by Inspector Lam. Following an investigation in January 2020, an Education Letter was sent to the Respondents by the Ombudsman. In summary, while it is true that the Respondents have never had a civil penalty imposed upon them, it is equally true that they have had previous interactions with the Ombudsman in relation to underpayments to employees, and have not complied with the terms of another compliance notice.
COMPLIANCE WITH MINIMUM STANDARDS
I have noted above the regime for Compliance Notices and the fact that Compliance Notices provide an efficient way in which to rectify underpayments to employees. It is important to observe that the subject matter of this Compliance Notice was the Ombudsman seeking to secure Yes Insurance’s compliance with minimum wages set out in the Award. Employees simply must be paid their minimum entitlements, nothing more nothing less. It is important not only that minimum employment standards be complied with, but that an effective mechanism exists (such as the mechanism of a Compliance Notice) for enforcement of minimum employment entitlements.
THE SIZE OF THE BUSINESS AND WHETHER PENALTIES WOULD BE OPPRESSIVE
The Respondents contended that the level of penalty that the Ombudsman seeks to have imposed would be oppressive. There is no detailed evidence before this Court about the size of the business, its financial circumstances or other related matters. In that context, I am unable to give active consideration to the size of the business and whether any penalties sought to be imposed would be oppressive.
CONTRITION AND CORRECTIVE ACTION
The Respondents have entered into a Statement of Agreed Facts. A hearing on liability in respect of the Compliance Notice, and the consequent costs and drain on resources that inevitably accompany such a hearing has been avoided. The Respondents also have rectified the underpayments made to Mr Hazari. That rectification occurred after these proceedings were commenced, but before the first return in this Court. Ordinarily, these matters would be sufficient to attract some form of discount on penalty.
The Ombudsman contends no discount is warranted. That submission is advanced on the basis that while the Respondents initially entered into the Statement of Agreed Facts, they subsequently sought to resile from it. There was then a hearing in this Court as to whether, among other things, the Respondents could resile from the Statement of Agreed Facts and whether the Respondents were covered by the Award. Upon this Court finding that the Respondents were covered by the Award, the Respondents appealed that outcome, only to subsequently discontinue the appeal.
A party in a case such as this is entitled to test whether the Award, from which the alleged contraventions spring, applies to it. That is particularly so in circumstances where a Compliance Notice can be issued on the basis of an Inspector’s reasonable belief. A recipient of a Compliance Notice should not face a higher penalty simply because it exercises rights available to it under the Act, particularly where the exercise of that right goes to a fundamental question such as whether an award applies.
The real issue in this matter is not that the Respondents took steps to clarify the issue of award coverage. The relevant issue is the lack of apology. No remorse has been expressed. The other aspect is that there is not any evidence that points to what the Respondents have done to reduce or eliminate the risk of future contraventions of workplace laws. That assumes some significance because the Respondents continue to operate the Business.
INVOLVEMENT OF SENIOR MANAGEMENT
There is no doubt on the material before me that senior management participated in the contravention. Ms Kimonides is the sole director and shareholder of Yes Insurance, and the evidence discloses she made the relevant decisions, including the decision not to comply with the Compliance Notice.
SPECIFIC DETERRENCE
The evidence before the Court is that Yes Insurance continues to operate businesses under the name of Yes Insurance and ‘Yes Assist’. Yes Insurance employs eight employees and holds an Australian Financial Services Licence. As I have noted above, the Respondents deliberately elected not to comply with the Compliance Notice. As I have noted above, they have also failed to strictly comply with an earlier Compliance Notice dated 8 October 2020 (though no proceeding was issued in respect of that non-compliance). There have also been other interactions that Yes Insurance has had with the Ombudsman. In these circumstances, and noting the lack of contrition and corrective action referred to earlier, there is a need for specific deterrence to be taken account of in this case.
GENERAL DETERRENCE
I have referred above to the importance of ensuring minimum standards are complied with, and of the importance of quick and efficient resolution of underpayment claims through the issuing of Compliance Notices. I agree with the submission of the Ombudsman that recipients of Compliance Notices must be under no misapprehension about their obligations to comply with those notices, or to quickly take steps to initiate a review of such notices. That is an important message to send in this case, particularly in circumstances where one reason advanced for non-compliance with the Compliance Notice was that Yes Insurance was awaiting the return of its property before rectifying the underpayment. There is a need to send a message that minimum entitlements must be paid in accordance with law by all employers.
CONCLUSION AS TO PENALTY
The Ombudsman submitted that a penalty in the range of 70%-80% of the maximum was appropriate for each of the Respondents. Ordinarily, I would consider this range to be too high for what is effectively the first contravention of a civil remedy provision. In my view, however, the range submitted is appropriate in this case. While this might be a first offence by the Respondents, there are aggravating features to which weight must be given. They include the deliberate nature of the breach, the lack of contrition, and the prior non-compliance with a Compliance Notice. Weighing all of these matters, and the other matters to which I have referred to above, I am of the view that each Respondent should pay a penalty set at 70% of the maximum. Orders will be issued to that effect.
I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Blake. Associate:
Dated: 25 August 2022