Fair Work Ombudsman v Zucco Farming Pty Ltd
[2019] FCCA 1277
•16 May 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
FAIR WORK OMBUDSMAN v ZUCCO FARMING PTY LTD & ANOR [2019] FCCA 1277
Catchwords:
INDUSTRIAL LAW – Civil penalty determination – first respondent operates stone fruit farm – engages two employees on casual basis over nine months paying under Award wages and no causal loading – respondents deny misconduct throughout investigation – proceeding listed for liability hearing – applicant serves evidence – new solicitor appointed to act for respondents – mediation – admission of liability – repayment of wages owing with interest – respondents proactively comply with regulators demands for compliance with workplace laws and re-education programs – applicable principles – penalties imposed.
Legislation:
Crimes Act 1914 (Cth), s.4AA
Fair Work Act 2009 (Cth), ss.3, 45, 535, 536, 539, 545, 546, 550, 557
Federal Circuit Court Act 1999 (Cth), s.16
Fair Work Regulations 2009 (Cth), regs.3.44, 4.01A, 4.01A, 3.44
Cases cited:
ACCC v Dataline.net.au Pty Ltd (2006) 236 ALR 665
ACCC v Yellow Page Marketing BV (No 2) [2011] FCA 352
Australian Building and Construction Commission v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113
Australian Building and Construction Commission v Construction, Forestry, Mining and Energy Union (2017) FCR 68
Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd [2006] FCA 21
Australian Competition and Consumer Commission v HJ Heinz Company Australia Ltd (No 2) [2018] FCA 1286
Cameron v The Queen (2002) 209 CR 339
Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46
Fair Work Ombudsman v Al Hilfi[2016] FCA 193
Fair Work Ombudsman v Garfield Berry Farm Pty Ltd [2012] FMCA 18
Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557
Fair Work Ombudsman v Hiyi Pty Ltd [2016] FCCA 1634
Fair Work Ombudsman v Jay Group Services Pty Ltd and Others [2014] FCCA 2869
Fair Work Ombudsman v JPA Manchester Pty Ltd [2017] FCCA 845
Fair Work Ombudsman v Kjoo Pty Ltd [2017] FCCA 3160
Fair Work Ombudsman v Kleen Group Pty Ltd & Anor [2016] FCCA 278
Fair Work Ombudsman v Lohr [2018] FCA 5
Fair Work Ombudsman v Mai Pty Ltd [2017] FCCA 559
Fair Work Ombudsman v Maroochy Sunshine Pty Ltd [2017] FCCA 559
Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557
Fair Work Ombudsman v Nerd Group Australia Pty Ltd & Anor (No. 3) [2012] FMCA 891
Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301
Fair Work Ombudsman v Oz Staff Career Services Pty Ltd [2016] FCCA 2594
Fair Work Ombudsman v Pulis Plumbing Pty Ltd [2017] FCCA 3013
Fair Work Ombudsman v Promoting U Pty Ltd [2012] FMCA 58
Fair Work Ombudsman v Rubee Enterprises Pty Ltd [2016] FCCA 3456
Fair Work Ombudsman v Something Aussie Pty Ltd [2017] FCCA 186
Fair Work Ombudsman v Sonisolar Pty Ltd & Anor [2016] FCCA 2027
Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd [2012] FMCA 258
Fair Work Ombudsman v Tiger Telco Pty Ltd (in liq) [2012] FCA 479
Fair Work Ombudsman v Vilpus Pty Ltd [2018] FCCA 741
Fair Work Ombudsman v Viper Industries Pty Ltd & Anor [2015] FCCA 492
FWO v Promoting U Pty Ltd [2012] FMCA 58
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8
Gibbs v The Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216
Johnson v R (2004) 205 ALR 346
Kelly v Fitzpatrick [2007] FCA 1080
Markarian v The Queen (2005) 228 CLR 357
Mason v Harrington Corporation Pty Ltd t/as Pangea Restaurant and Bar [2007] FMCA 7
Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70
Pearce v R (1998) 194 CLR 610
Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union [2008] FCAFC 170
Ponzio v B&B Caelli Constructions Pty Ltd [2007] FCAFC 65
Rocky Holdings Pty Ltd v Fairwork Ombudsman [2014] FCAFC 62
Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249
Trade Practices Commission v CSR Ltd [1990] FCA 521
Applicant: FAIR WORK OMBUDSMAN
First Respondent: ZUCCO FARMING PTY LTD
Second Respondent: CHRISTOPHER ZUCCO
File Number: MLG 1181 of 2017
Judgment of: Judge A Kelly
Hearing date: 8 May 2018
Date of Last Submission: 8 May 2018
Delivered at: Melbourne
Delivered on: 16 May 2019 REPRESENTATION
Counsel for the Applicant: Mr JRM Tracey
Solicitors for the Applicant: Office of the Fair Work Ombudsman
Counsel for the Respondents: Mr PW McDermott
Solicitors for the Respondents: Joliman Lawyers THE COURT DECLARES THAT:
(1)In the period between August 2015 and March 2016, the first respondent contravened the following civil remedy provisions:
(a)section 45 of the Fair Work Act 2009 (Act), by failing to pay Abbas abd Ghafar and Mohd Razif Md Yunus (the employees) the minimum hourly rate of pay in accordance with clause 14 of the Horticulture Award 2010 (Award);
(b)section 45 of the Act, by failing to pay the employees the required public holiday rate of pay in accordance with clause 28.3 of the Award;
(c)section 45 of the Act, by failing to pay the employees the required casual loading in accordance with clause 10.4(b) of the Award;
(d)regulation 3.44(1) of the Fair Work Regulations 2009 (Regulations) by creating false or misleading records of the rate of remuneration paid to the employees;
(e)regulation 3.44(1) of the Regulations, by creating false or misleading records of the hours worked by the employees;
(f)regulation 3.44(6) of the Regulations, by knowingly making use of false or misleading entries in respect of the rate of remuneration in employee records:
(i)on 27 May 2016, in response to a notice to produce dated 18 May 2016; and
(ii)on 8 August 2016, in response to a notice to produce dated 26 July 2016;
(g)regulation 3.44(6) of the Regulations, by knowingly making use of false or misleading entries in respect of hours worked in employee records on each of the occasions referred to in paragraph (1)(f) of this Order.
(h)section 535(1) of the Act, by failing to make and keep an accurate record of the rate of remuneration paid to the employees;
(i)section 535(1) of the Act, by failing to make and keep an accurate record of the hours worked by the employees; and
(j)section 536(1) of the Act, by failing to issue payslips to the employees within one working day of payment.
(2)Pursuant to section 550 of the Act, the second respondent was involved in each of the contraventions committed by the first respondent as identified in paragraph (1) of this Order.
(3)By reason of the first respondent’s contraventions of section 45 of the Act, the employees suffered a loss of wages in the total underpayment amount of $13,529.57.
THE COURT ORDERS THAT:
(4)Pursuant to sections 545(1) and 546(1) of the Act, the first respondent pay pecuniary penalties for the contraventions set out in paragraph (1) of this Order in the amount of $120,000 within 90 days of this Order.
(5)Pursuant to sections 545(1) and 546(1) of the Act, the second respondent pay pecuniary penalties for the contraventions set out in paragraph (1) of this Order in the amount of $24,000 within 90 days of this Order.
(6)Pursuant to section 546(3)(a) of the Act, all pecuniary penalties imposed on the first and second respondents be paid to the Commonwealth.
(7)Pursuant to section 545(1) of the Act, the first respondent, within 30 days of the date of this Order, must display a notice (Workplace Notice) on the following terms:
(a)the Workplace Notice must be displayed at the shed, located at the first respondent’s farm on Goodman Road, Woorinen, in the State of Victoria;
(b)the Workplace Notice must contain:
(i)information on the current minimum rates of pay and penalty rates under the Award;
(ii)information on how to download the Fair Work Ombudsman’s Record My Hours app;
(iii)information on how to contact the Fair Work Ombudsman; and
(iv)the name and contact details of any labour hire companies through which labour hire employees are engaged;
(c)the Workplace Notice must be in a form approved by the applicant at least seven days prior to the first respondent displaying the Workplace Notice;
(d)the first respondent will provide proof of display of the Workplace Notice to the applicant within 14 days of the Workplace Notice being approved by the applicant; and
(e)the Workplace Notice must be displayed until 4.00pm on Friday, 16 May 2020.
(8)Liberty is reserved to the applicant to apply to the Court on seven days’ notice in the event that any of the preceding orders are not complied with.
FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNEMLG 1181 of 2017
FAIR WORK OMBUDSMAN Applicant
And
ZUCCO FARMING PTY LTD First Respondent
CHRISTOPHER ZUCCO Second Respondent
REASONS FOR JUDGMENT
Introduction
1.These reasons for judgment explain orders that are made on the application of the Fair Work Ombudsman (FWO) seeking the imposition of penalties upon the first respondent, Zucco Farming Pty Ltd (Zucco), which conducts a stone fruit farm in Woorinen, Victoria, and the second respondent, who is its sole director, manager and 50% shareholder.
2.The application arises out of admitted contraventions of the Fair Work Act 2009 (Cth) (Act), the Fair Work Regulations 2009 (Regulations) and breaches of the Horticulture Award 2010 (Award) involving the underpayment of $13,529.57 of wages (including casual loading of $10,339.92) to two farm labourers (employees) over the period August 2015 – March 2016 (relevant period) and related contraventions arising out of the creation and use of false records.
3.As a result of a successful mediation the parties were able to agree on the question of liability, including that the second respondent was knowingly involved[1] in the contraventions by Zucco.
[1] Act, s 550.
4.The matter proceeded by way of a Statement of Agreed Facts (SOAF) and certain affidavits. The following contraventions are now admitted:
a)non-payment of minimum hourly rates;[2]
[2] Act, s 45; Award, cl 14.
b)non-payment of public holiday entitlements;[3]
[3] Act, s 45; Award, cl 28.3.
c)non-payment of casual loadings;[4]
[4] Act, s 45; Award, cl 10.4(b).
d)creation of false or misleading records of the rate of remuneration paid to the employees;[5]
[5] Regulations, reg 3.44(1).
e)creation of false or misleading records of the hours worked by the employees;[6]
[6] Regulations, reg 3.44(1).
f)knowingly making use of false or misleading entries in respect of the rate of remuneration in employee records:
i)on 27 May 2016, in response to a notice to produce; and
ii)on 8 August 2016, in response to a notice to produce;[7]
g)knowingly making use of false or misleading entries in respect of hours worked in employee records in the same manner as is set out in [4(f)] above.
h)failing to make and keep an accurate record of the rate of remuneration paid to the employees;[8]
i)failing to make and keep an accurate record of the hours worked by the employees;[9] and
j)failing to issue payslips to the employees within one working day of payment.[10]
[7] Regulations, reg 3.44(6).
[8] Act, s 535(1).
[9] Act, s 535(1).
[10] Act, s 536(1).
5.From the foregoing summary, it is apparent that the penalties sought entail the failure to pay the applicable minimum hourly rates, public holiday entitlements and casual loadings to two employees over a nine month period amounting to $13,529.57 together with the creation, making and knowing use of false or misleading records and entries in wage records and the timely provision of payslips.
6.The maximum penalties for the subject contraventions is $252,000 and $50,400 in relation to the first and second respondent respectively. The range of penalties that are recommended by the applicant are:
a)in relation to Zucco: $140,130 and $162,810
b)in relation to the second respondent: $28,026 and $32,562
Background
7.The employees, Mr Abbas Abd Ghafar and Mr Mohd Razif MD Yunus, are Malaysia citizens who, upon arrival in Australia in 2013 moved to Swan Hill, Victoria, where they worked as farm labourers. Mr Yunus is the son in law of Mr Ghafar. Before commencing work for Zucco, they had worked as labourers, obtaining employment through a contract hire company and being paid lesser wages than those paid to them by Zucco.
8.On about 31 July 2015, Mr Ghafar and Mr Yunus approached the second respondent to work on the Zucco farms. The second respondent said he would pay the employees $16 per hour and they accepted that offer.
9.On 3 August 2015, the employees commenced employment on a casual basis, performing farm hand work, including pruning, picking stone fruit, and general cleaning. During the relevant period, the employees received hourly rates varying between $15.41 and $16.77 per hour for all hours they worked. Save for two pay periods, Zucco did not give the employees any payslips during the relevant period. Contrary to the fact, those payslips showed hourly pay rates of $21.61. The provision of the payslips was partly responsible for the instigation of the proceeding.
10.On about 15 March 2016, Mr Ghafar injured his hand while performing work. A few days afterwards, Mr Yunus spoke to the second respondent about his pay rate, asking: “You pay me $16 right? . . . But my pay slip has $21”. The second respondent replied: “. . . I am not paying you $21 . . . I do that just for my bookwork.” Mr Yunus and Mr Ghafar did not return to work after these events. A few weeks later they attended the Bendigo office of the FWO where they filed requests for assistance in relation to the non-provision of pay slips, underpayment of wages, and working on weekends and public holidays.
11.Between June 2016 and March 2017, a Fair Work Inspector conducted an investigation (Investigation) doing so with the assistance of another FWO Inspector. During the Investigation, on 18 and 26 May 2016 respectively two Inspectors issued a statutory notice (Notices) requiring the production of time and wages records in relation to the employees.
12.When responding to the Notices, Zucco produced records and documents including pay slips being the only records of the hours worked that had been kept by it and which were relied on by the second respondent as being records which showed the hourly pay rate being paid to the employees. Those pay records incorrectly recorded that the employees were being paid rates of pay of $20.47 or $21.61 per hour.
13.On 17 February 2017, an Inspector issued a letter to the respondents advising that they had contravened the Act and Regulations and breached the Award by failing to pay the employees amounts sufficient to meet their minimum entitlements, for failing to issue pay slips to the employees, and for creating and providing to the FWO false records of the amounts paid and hours worked by the employees. Following this letter, the respondents repeatedly denied FWO’s alleged contraventions.
14.On 5 June 2017, the applicant commenced this proceeding.
15.On 15 September 2017, the respondents filed an amended defence in which the denial of contraventions was maintained.
16.On 17 August 2017 the matter was set down for a hearing with orders made for the filing and serving of liability evidence being made on 12 December 2017. At significant cost, the evidence was prepared, filed and served upon the respondents. As appears below, responsibility for an assessment of this evidence fell to a solicitor who had been appointed to take over the conduct of the matter, as he did in early January 2018.
17.In March 2018, the parties participated in mediation in consequence of which, on 28-29 March 2018 respectively:
a)Zucco rectified the alleged underpayments;
b)the respondents admitted the contraventions;
c)the parties agreed the matters set out in the SOAF.
Penalty recommendations
18.The applicant submitted that the respondents’ contravening conduct was serious and highly aggravating. On the evidence, the respondents had deliberately created false and misleading records, and made false representations to the FWO, doing so, so as to create the appearance of compliance with, but while operating with a disregard for, workplace laws. It further submitted that the employees were vulnerable, being from non-English speaking backgrounds, subject to bridging visas, and working in low-skilled employment. The applicant further submitted that the respondents demonstrated a lack of contrition and cooperation by reason that, despite rectifying the underpayments and making admissions, this occurred only after the institution of this proceeding, causing substantial delay and the attendant time and expense of preparing liability evidence. Further, it was submitted that their conduct undermined the purpose of the Act in ensuring compliance with a safety net of minimum entitlements and so engaged the need for deterrence.
19.As noted at [6], the applicant furnished recommendations as to appropriate pecuniary penalties which it submitted were an appropriate response to the respondents’ contraventions.
20.The basis upon which those penalties were recommended was set out in Annexure A to these reasons for judgment and was supported by the matters contained in the SOAF, the affidavits and submissions that were filed by the applicant. The respondents filed no evidence.
Applicable principles
21.An eligible court, including this court, is authorised to impose a penalty in respect of a contravention of a civil remedy provision of the Act.[11] Civil remedy provisions include a provision referred to in column one of the table in s 539(2) of the Act, and in column one of the table in reg 4.01A of the Regulations.
[11] Act, 546(1).
22.The purpose of imposing a penalty under the Act is primarily protective of the public interest in securing compliance with the Act. The object of a pecuniary penalty is to place a price on contravention that is “sufficiently high to deter repetition by the contravenor and others who might be tempted to contravene.”[12] The penalty that is fixed should reflect that stated purpose and object with a view to ensuring that the penalty is not merely regarded as an acceptable cost of doing business.[13] In terms of general deterrence, it is also important to relay the message that such contraventions are both serious and unacceptable.
[12]Australian Building and Construction Commission v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113, [98] (Dowsett, Greenwood and Wigney JJ).
[13] Ibid.
23.In fixing the amount of the penalty, the court is required to identify and balance all relevant facts, circumstances and to make a value judgment as to what is considered to be an appropriate penalty. The court is authorised to adopt a process of instinctive synthesis which evaluates all factors that are considered relevant to the penalty and make a value judgment as to an appropriate penalty in all the circumstances.
24.The approach of the court in determining penalties is well settled and was common ground. It involves the following distinct steps:
a)Step One: The court is to identify the separate contraventions involved. For the purposes of s 539(2), each contravention of an obligation located in the Act constitutes a separate contravention of a civil remedy provision of the Act;[14]
b)Step Two: The court should consider whether any of the breaches taken together constitute a single course of conduct pursuant to s 557(1) such that multiple contraventions should be treated as a single contravention;
c)Step Three: To the extent that two or more contraventions have common elements, this should be taken into account in considering what an appropriate penalty is in all the circumstances for each contravention. The respondents should not be penalised more than once for the same conduct. The penalties imposed by the court should be an appropriate response to the respondents’ actions.[15] Importantly, this third task is distinct from, and in addition to, the final application of the ‘totality principle’;[16]
d)Step Four: The court will consider an appropriate penalty to impose in respect of each contravention, whether a single contravention, a course of conduct, or group of contraventions, having regard to all of the circumstances of the case; and
e)Step Five: Having fixed an appropriate penalty for each contravention, the court should then review the aggregate penalty so as to determine whether it is an appropriate response to the contravening conduct.[17] In doing so, the court should apply an ‘instinctive synthesis’ in making this assessment.[18] This final step is commonly known as the ‘totality principle’.
See Fairwork Ombudsman v NSH North Pty Ltd (North Shanghai).[19]
[14]Gibbs v The Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216, 223 (Gray J); McIver v Healey [2008] FCA 425, [16] (Marshall J).
[15]Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8, [71] (Graham J).
[16]Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70, [41]-[46] (Stone and Buchanan JJ).
[17]See Kelly v Fitzpatrick [2007] FCA 1080, [30] (Tracey J): Australian Ophthalmic Supplies, [23] (Gray J), [71] (Graham J) and [102] (Buchanan J).
[18] Australian Ophthalmic Supplies, [27] (Gray J), [55] and [78] (Graham J).
[19] [2017] FCA 1310, [36] (Bromwich J).
Consideration
(1) Identified contraventions
25.The Admitted Contraventions are set out in [4] above.
(2)-(3) Course of conduct and grouping
26.By s 557(1), for certain specified contraventions of the Act,[20] where a contravention was committed by the same person and arose from the same course of conduct, two or more contraventions of the same civil remedy provision are to be treated as a single contravention. In this context, of particular relevance is whether the acts arose out of the same, or separate, act[s] or decision[s] by the respondent. The phrase ‘civil remedy provision’ as employed in s 557 does not refer to either ss 44 or 45 of the Act, but to a provision of the National Employment Standards or a term of a Modern Award.[21] In North Shanghai, Bromwich J drew attention to the circumstance that deciding the application of s 557 requires focus upon the substance of the particular obligation creating provisions and grouping them so as to produce a rational outcome.[22]
[20]Including contraventions of ss 45, 535, and 536, and contraventions of the civil remedy provisions prescribed by the Regulations.
[21]North Shanghai, [2017] FCA 1310, [39]; see also Australian Competition and Consumer Commission v HJ Heinz Company Australia Ltd (No 2) [2018] FCA 1286, [67]-[74] where White J accepted that the court may take a substantial overlap into account.
[22]Ibid; see also Rocky Holdings Pty Ltd v Fairwork Ombudsman [2014] FCAFC 62, [18] (North, Flick and Jagot JJ).
27.The applicant here accepted that contraventions of the same term of the Award, of ss 535(1) and 536(1) and of regs 3.44(1) and 3.44(6), in relation to multiple employees, may be treated as one contravention under s 557(1), provided that there was one course of conduct.
28.The applicant also accepted that, save for two contraventions, such treatment was appropriate in this proceeding.
29.The two contraventions, which it was submitted should not be treated as a single contravention, were the two contraventions of reg 3.44(6). The applicant maintained, correctly, that this was because each contravention involved the production of records in response to separate statutory notices that had been issued at two different points in time; namely, in May 2016 and in July 2016 respectively. I agree that, in responding to each Notice, the respondents should be regarded as having made distinct and deliberate decisions on each occasion to make use of the false records which had been created when responding to each statutory notice. To treat such contraventions as a single instance would not reflect the seriousness of the contravening conduct, and would fail to recognise what were two deliberate and separate instances of contravening conduct. While the use of analogies may on occasion be inapt, a comparison might usefully be made of a driver who drove continuously at excessive speed over a prolonged journey with one who did so on different occasions.
30.The applicant also correctly submitted that in addition to the statutory course of conduct provisions, it was open to the court to group separate contraventions where those contraventions contained common elements or could be said to overlap with one another.[23] It was said to be appropriate for the court to group contraventions where, to treat them separately, would potentially penalise a respondent twice for the same or substantially similar conduct.
[23]See Pearce v R (1998) 194 CLR 610, [40] (McHugh, Hayne and Callinan JJ); Johnson v R (2004) 205 ALR 346, [27]-[34] (Gummow, Callinan and Heydon JJ), Australian Ophthalmic Supplies, [46], [72] (Graham J), [93] (Buchanan J); Fair Work Ombudsman v Tiger Telco Pty Ltd (in liq) [2012] FCA 479, [24]-[25] (Bromberg J).
31.The applicant accepted that the contraventions of reg 3.44(1) and s 535(1) should be grouped. Zucco had employed a system where it falsely recorded the hours worked and hourly rates at which the employees were paid, and in doing so, had failed to keep accurate records of time and wages. In the circumstances of this case, contraventions relating to the creation and use of false records and record keeping were appropriately to be grouped as though constituting a single contravention.
32.Upon those principles, the applicant submitted there were seven groups of contraventions for which it sought penalties against each respondent. The suggested grouping of the contraventions is reflected in the table that is Annexure A to these reasons for judgment.
33.The respondent submitted correctly that a contravenor may not take the benefit of s 557 where the breaches of s 45 constituted separate breaches of an Award.[24] It was also submitted correctly that the relevant question to be asked was whether the breaches arose out of separate acts or decisions or out of a single act or decision by the contravenor.[25]
[24] Citing Rocky Holdings Pty Ltd v Fairwork Ombudsman [2014] FCAFC 62.
[25] Citing Fairwork Ombudsman v Something Aussie Pty Ltd [2017] FCCA 186, [21].
34.Contrary to the respondents’ submissions, I do not accept that it was appropriate to group the contraventions for failure to pay minimum wages and failure to pay casual loading. It may be appropriate in some cases to group contraventions which overlap or have common elements as to do so will avoid penalising a contravenor more than once for the same, or substantially similar, conduct.[26] However, I do not accept that there is a sufficient degree of overlap or commonality in a failure to pay minimum wages and casual loading. The only true commonality is that each contravention sounded in money. The critical factor which denies these contraventions a sufficient degree of commonality is that the obligations to make those respective payments are qualitatively distinct. Mr Tracey of counsel correctly emphasised that because the payment of casual loading is designed to assist employees who lack the security of permanent employment, it was not appropriate in this case to group this contravention with the contravention for non-payment of minimum wages. In evaluating commonality, it is of central assistance to have regard to the character and purpose of the relevant payments. Viewed objectively, to group such qualitatively distinct matters would not secure the result of avoiding the imposition of a penalty more than once. Instead, it would achieve the result that a contravenor escapes the imposition of a penalty for a serious and distinct form of offending. This conclusion is reinforced by the fact that, of the total underpayments of $13,529.57 the unpaid casual loading formed $10,339.92 of that sum.
[26]Cf Fairwork Ombudsman v Vilpus Pty Ltd [2018] FCCA 741, [25] (Mercuri J); (Burchardt J); Fairwork Ombudsman v Garfield Berry Farm Pty Ltd [2012] FMCA 18, [28] (Riley FM); Fairwork Ombudsman v Lohr [2018] FCA 5, [32]-[33] (Bromich J).
(4) Maximum Penalties
35.The applicant has standing to seek penalties in respect of each of the contraventions.[27]
[27] Act, s 539(2); Regulations, reg 4.01A(2).
36.It is also settled that careful attention must be given to the maximum penalty for at least three reasons: (1) it should be recognised that, as the legislature has fixed a maximum penalty, it is to be taken as reflecting the seriousness of the prescribed conduct; (2) the identification of that maximum penalty then permits a comparison between the worst possible case and that which the court is being asked to consider; (3) the maximum penalty should be recognised as providing a yardstick which should be taken and balanced with all other relevant factors.[28] Notwithstanding that a prescribed maximum penalty may be high and as reflecting the amount necessary to ensure that general deterrence is met, the amount of a penalty should not be so high as to be oppressive.[29]
[28]Australian Building and Construction Commission v Construction, Forestry, Mining and Energy Union (2017) FCR 68, [106] (Dowsett, Greenwood and Wigney JJ), citing Markarian v The Queen (2005) 228 CLR 357, [31] (Gleeson CJ, Gummow, Hayne and Callinan JJ).
[29] Supra, [2017] FCAFC 113, [107].
37.The Act draws a distinction between the maximum penalties that are imposed on persons and corporations. Section 539(2) of the Act and reg 4.01A provide for the maximum penalty the court may impose against an individual respondent for each contravention.[30] Contrastingly, by s 546(2)(b) of the Act, each of the maximum penalties set out in s 539(2) is multiplied by five for corporate respondents.
[30]Section 539(4) of the FW Act provides that regulation 4.01A of the FW Regulations has the same effect as if it were set out as an item in the table at section 539(2). At the time the contraventions occurred, which was prior to the amendments to the FW Act provided for in the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 (Cth), the maximum penalties were:
(a)60 penalty units in respect of contraventions of section 45 of the FW Act;
(b)30 penalty units in respect of contraventions of sections 535 and 536 of the FW Act; and
(c)20 penalty units in respect of contraventions of regulations 3.44(1) and 3.44(6) of the FW Regulations.
38.During the relevant period, being at the times that each admitted contravention had occurred, a ‘penalty unit’ was defined as $180.[31] Ultimately, it was common ground that by operation of ss 539(2) and 546(2)(b) of the Act and reg 4.01A of the Regulations respectively, the maximum penalties which the court could impose are:
a)for Zucco: $252,000.
b)for the second respondent: $ 50,400.
[31]In the Act, a ‘penalty unit’ has the same meaning as in the Crimes Act 1914 (Cth). During the relevant period, s 4AA(1) of the Crimes Act 1914 (Cth) provided that a penalty unit was $180.
39.As stated above, the court should consider the maximum penalties that could be imposed on each respondent. This forms part of the comparative exercise of determining where the admitted contraventions may be located across the spectrum of contravening conduct.[32] The maximum penalties “taken and balanced with all of the other relevant factors [provide] a yardstick” when determining the penalty that is appropriate to the circumstances of the individual case.[33]
[32] Mornington Inn, [88] (Stone & Buchanan JJ).
[33] Markarian v R [2005] HCA 25, [31] (Gleeson CJ, Gummow, Hayne & Callinan JJ).
40.An important distinction is drawn between the basis on which penalties are imposed under the criminal law and those which are imposed by way of civil penalty. In particular, the purpose of a civil penalty is primarily, if not wholly, that of promoting the public interest in compliance with the laws that have been contravened. Such a purpose does not engage concepts of retribution or rehabilitation. In Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate[34] (DFWBII) French CJ, Kiefel, Bell, Nettle and Gordon JJ held:
. . . whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, is primarily if not wholly protective in promoting the public interest in compliance:
Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act]. . . The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.”[35]
[34] [2015] HCA 46, [34].
[35] Cth v FWBII at [55], citing Trade Practices Commission v CSR Ltd [1990] FCA 521.
In agreeing with French J (as his Honour then was), the High Court confirmed that consideration of the penalty factors identified in Trade Practices Commission v CSR Ltd,[36] was to be undertaken with the overarching consideration of what penalty would achieve the principal objects of deterrence; both specific and general.
[36][1990] FCA 521, which were adopted in this jurisdiction in Mason v Harrington Corporation Pty Ltd t/as Pangea Restaurant and Bar [2007] FMCA 7. The so-called “checklist” of factors set out in Pangea was approved and adopted in Kelly and has been employed since.
41.Upon those statements of principle it may be said that since neither retribution nor rehabilitation are relevant in the determination of an appropriate civil penalty, this serves to intensify the focus of a civil penalty determination upon issues of specific and general deterrence.
42.A settled catalogue[37] of relevant factors include:
[37]See, eg, Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8, [89] (Buchanan J); Kelly v Fitzpatrick [2007] FCA 1080 (Tracey J).
a)the nature and extent of the conduct which led to the breaches;
b)the circumstances in which that conduct took place;
c)the nature and extent of any loss or damage sustained as a result of the breaches;
d)whether there had been similar previous conduct by the respondent;
e)whether the breaches were properly distinct or arose out of the one course of conduct;
f)the size of the business enterprise involved;
g)whether or not the breaches were deliberate;
h)whether the party committing the breach had exhibited contrition, taken corrective action and cooperated with the enforcement authorities;
i)the need to ensure compliance with minimum standards by provision of effective means for investigation; and
j)the need for specific and general deterrence.
43.Although these are not the only factors and do not constitute a “rigid catalogue of matters for attention”[38] they provide a useful framework within which the consideration of what constitutes an appropriate penalty in the circumstances of a particular case. Other formulations accept each of these factors but include the separate consideration of whether senior management was involved.[39] I consider them in turn.
[38] Australian Ophthalmic Supplies at [88]-[91].
[39] See, eg, Kelly v Fitzpatrick [2007] FCA 1080 (Tracey J).
(a)-(b) The nature, extent and circumstances of contravening conduct
44.Factors relating to the objective seriousness of a contravention include:
. . . the extent to which the contravention was the result of deliberate, covert or reckless conduct, as opposed to negligence or carelessness; whether the contravention comprised isolated conduct, or was systematic or occurred over a period of time; if the defendant is a corporation, the seniority of the officers responsible for the contravention; the existence, within the corporation, of compliance systems and whether there was a culture of compliance at the corporation; the impact or consequences of the contravention on the market or innocent third parties; and the extent of any profit or benefit derived as a result of the contravention.[40]
[40]Australian Building and Construction Commission v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113, [103].
45.The applicant submitted that the contraventions had: (a) affected employees who were vulnerable; (b) been sustained throughout the relevant period: (c) taken place in circumstances where the respondents attempted to mask the hours which the employees had worked and the below-minimum hourly rates in which they were being actually paid. The various types of contravening conduct are considered below. I am satisfied that this conduct constituted serious contraventions of the Act.[41]
[41] See s 557A(1).
Involvement of senior management
46.At all relevant times, the second respondent was the sole director of, and owned 50% of the shares in, Zucco. He was in control of all operations of its business. The second respondent was also intimately involved in each of Zucco’s contraventions. He was the person who effectively oversaw the operations of its business, including the creation and maintenance of the false pay records, and the work performed by the employees. By his actions, the second respondent perpetrated each contravention by Zucco. To say as much is, however, to recognise that what was essentially a family business was conducted through a corporate vehicle. Of greater relevance is that the decisions to pay below Award entitlements were decisions made by one owner of Zucco’s business. That is to say, it is not a case in which the contraventions arose from the conduct of persons who had delegated management responsibility but for which the owner bore ultimate responsibility.
Underpayment of wages
47.The employees vulnerability was said to arise from the circumstance that each was a Malaysian national who held a limited command of English, having arrived in Australia in mid-2013 and who had been granted bridging visas in early 2015. It was said that neither employee was aware of their minimum entitlements at the relevant time.
48.On occasion courts have found that circumstances which may give rise to vulnerability include that a person had limited English language skills, visa status and worked in low-paid industries.[42] So much may be accepted. Yet, the concept covers a broad spectrum of circumstances which necessarily admits of differing degrees of vulnerability.
[42]See, eg: Fair Work Ombudsman v Al Hilfi[2016] FCA 193, [25]; Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557, [456], [457]; and Fair Work Ombudsman v Sonisolar Pty Ltd & Anor [2016] FCCA 2027, [48], [116], [140].
49.Throughout the relevant period, Zucco paid the employees on rates less than the Award minimum rates. These contraventions came about because the $16 hourly rate of pay was below the minimum that they were lawfully entitled to as unskilled, casual labourers under the Award in respect of hourly rates, casual loadings and public holiday rates.
50.The employees’ evidence was that they were not aware of their true entitlements when they first began their employment and that they only became aware of the lawful minimum wage rate at some stage after their employment with Zucco began. Further, when seeking employment, Mr Yunus attempted unsuccessfully to negotiate an hourly rate of pay with the second respondent. Both employees accepted the $16 hourly rate because they had been looking for work for some time.
51.The applicant properly submitted that at all times the second respondent was aware of the correct entitlements owed to Zucco’s employees. The second respondent created the pay records which indicated consistency with the legal minimum hourly rate for a casual farm hand wage under the Award and despite this, he had engaged in the negotiation of the employees’ pay rates and deliberately underpaid them. Further, he had refused to pay the legal minimum rates when the employees had asked him to do so, leaving the employees to feel that they had no choice but to resign (it being said that they did not want to work for below-minimum wages but that the respondents would not pay the legal rate). While the respondents maintained that there had been no discussion of pay rates since the date on which the employees were engaged, there was evidence that, after the employees obtained a payslip, the second respondent held a discussion in which he refused to pay an hourly rate of $21 (as stated on the payslip) and that he had said: “I’m not paying you [$21]. Listen to me, Ajib. I’m not paying 21. Do you understand?”
52.The applicant submitted that by reason of these matters, the second respondent had dishonestly taken advantage of the employees’ vulnerability at a time when they were ignorant of their true entitlements, and were reliant on this below-legal wage in order to sustain their living expenses. What was said to be more aggravating was that the employees felt compelled to leave their employment because their employer would not pay them at least the bare minimum of what they were entitled to receive. The applicant submitted that an employee – particularly one who was vulnerable – should never feel compelled to remain employed on remuneration which is below statutory minimum entitlements, or be presented with such a ‘take it or leave it’ ultimatum by an employer.
53.The respondents submitted that the general concept of vulnerability admitted of further classification and that a distinction could properly be drawn between cases of complete exploitation and a case of the present kind. I am prepared to accept that such a distinction may be drawn. In particular, attention was drawn to the following matters. The applicants had come to Australia in 2013 and moved directly to Swan Hill at that time. The employees had not been engaged by the respondents since 2013 but had worked for a number of other farms until approaching the second respondent in mid-2015. In that period, the employees had secured work via contract labour firms and had been paid less than they had been able to secure with Zucco. Although the language of the affidavits bore some similarity, Mr Yunus stated:
In winter 2015, I thought about trying to get work with a farmer directly, instead of a contractor. I thought if I worked direct, I might get more money. I started asking some farmers I knew in the region for work.
The employees conduct indicated that they had a demonstrated capacity for initiative in seeking employment and negotiating directly rather than merely accepting lower contract rates from the labour hire firms. Their decisions to seek employment and to negotiate directly was indicative of some level of acumen and autonomy. Equally, it was said that the employees had been able to keep records and that this had been a catalyst for establishing the contraventions that were now admitted. Viewed collectively, those matters served to distinguish the case from those in which an extreme level of vulnerability or exploitation was evident.[43]
[43]Cf Fairwork Ombudsman v Maroochy Sunshine Pty Ltd [2017] FCCA 559; Fairwork Ombudsman v Mai Pty Ltd [2017] FCCA 559; Fairwork Ombudsman v JPA Manchester Pty Ltd [2017] FCCA 845; North Shanghai, [2017] FCA 1301, [131].
54.It was appropriate, nonetheless, to recognise that the respondents conduct was deliberate and dishonest. The creation of false records and the maintenance of a denial of the falsity of those records support an inference of knowledge of wrongdoing.[44] The present case stood apart from cases in which an employers contraventions arose from mere neglect, oversight, or even recklessness. These factors are, however, matters which are entitled to free-standing weight and should not always be employed to colour the true character of an employees vulnerability.
[44] North Shanghai, [2017] FCA 1301, [208].
Record-keeping contraventions
55.During the Investigation, the respondents produced pay records in response to the Notices, which purportedly showed that the employees were being paid:
a)$20.47 between 3 August 2015 and 3 September 2015; and
b)$21.61 between 4 September 2015 and 24 March 2016.
(collectively, the False Pay Rates).
56.Contrary to those pay records, the employees were not actually paid upon the False Pay Rates. Instead, they were paid at a hourly rate of ~$16.
57.The pay records so produced demonstrated that the calculations of those False Pay Rates were achieved by reference to a complex system whereby the respondents ‘reverse engineered’ the amounts shown. Rather than simply comply with their obligations, the respondents had:
a)calculated gross weekly amounts on the basis of $16 per hour;
b)divided the gross weekly amount by the hourly rate shown in the pay records (i.e., $20.47 or $21.61 respectively);
c)rounded this number to obtain a false record of the hours that the employees worked;
d)multiplied the false pay rates by the fictitious record of hours; and
e)used the adjusted gross weekly figure to determine and pay the employees a net amount of pay.
58.The respondents’ system of reverse engineering the entries made in the pay records served to demonstrate that their conduct was persistent and sustained throughout the relevant period. I accept that, so as to determine the entries to be made in those records, the respondents would have had to undertake this system of reverse engineering in every week that the employees were paid from August 2015 to March 2016.
59.The creation and production of false records is highly aggravating and constitutes conduct which is “about as serious as it gets”,[45] and “constitut[es] the highest level of dishonesty.”[46] Self-evidently, the respondents’ system of reverse engineering and producing the false pay records amounted to a deliberate and contrived scheme that was designed to conceal the true position; namely, that the respondents’ payment practices were unlawful. Importantly, the falsification of records bears several aspects including their creation, use, promulgation and misuse, including by production to the FWO.[47]
[45] Fair Work Ombudsman v Oz Staff Career Services Pty Ltd [2016] FCCA 2594, [34].
[46]Fair Work Ombudsman v Kjoo Pty Ltd [2017] FCCA 3160, [54]; North Shanghai, [223]-[229].
[47] North Shanghai, [2017] FCA 1301, [223]ff.
60.Moreover, the employees were only provided with their pay slips on a very few occasions – being when they were requested. The failure to provide pay slips should not be seen as an administrative matter but as having the serious consequence for employees that they are limited in their ability to monitor and pursue their legal entitlements.[48] Fortuitously, these employees did receive some pay slips that alerted them to the impugned conduct which they challenged. The applicant submitted, correctly, that the present case illustrated the importance of pay slips and how a failure to provide them as required by the Act could hinder an employee’s ability to monitor his or her entitlements.
[48]Fair Work Ombudsman v Hiyi Pty Ltd [2016] FCCA 1634 at [34]; Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd [2012] FMCA 258, [67]; Fair Work Ombudsman v Mai Pty Ltd & Anor [2016] FCCA 1481, [111].
61.The nature of the contraventions and the circumstances in which they were committed are significant as evidencing the serious exploitation of employees and a deliberate falsification of records. The applicant submitted that this was highly aggravating conduct, deserving of a penalty which reflected its serious nature.
(c) Nature and extent of the loss
62.As noted, the contraventions resulted in the employees being underpaid a total sum of $13,529.57 being ~$7,000 in underpayments for each employee within a seven-month period. It may be accepted that while the sum of an underpayment may not be objectively large this does not mean that they are to be seen as insignificant,[49] particularly in circumstances where employees, as here, were reliant on the below minimum wages that were being paid by Zucco in order to pay for their everyday living expenses. In all the circumstances, I am quite prepared to infer that, to have been deprived of ~$1,000 each per month may well have had a significant impact for these employees.[50] So much was candidly accepted by counsel for the respondents.
[49] Fair Work Ombudsman v Viper Industries Pty Ltd & Anor [2015] FCCA 492 [7], [36].
[50] See North Shanghai, [2017] FCA 1301, [96].
63.Although the non-payment of these entitlements was eventually rectified, this did not occur until 28 March 2018. In the result, the employees were denied the benefit of their proper pay for more than 2.5 years after they had become entitled to that pay. The applicant correctly submitted that, during this time, Zucco benefitted financially as it retained that money. However, it must be recognised that the respondents also paid interest on the employees’ outstanding entitlements.
64.Further, I accept the applicant’s submission that the financial strain caused by the underpayments and the respondents’ conduct could be seen in the evidence. For example, Mr Yunus stated that “[i]t took me months to find a new job. Because I wasn’t getting paid, it was hard for Farrah and me to afford things. We couldn’t afford to pay rent on our own house any more so we moved back in with Farah’s parents.” While the respondents were not obliged to provide casual workers with continuous employment, they were obliged to conform to their statutory and Award obligations.
(d) Similar previous conduct
65.The applicant acknowledged that the respondents had not previously been the subject of proceedings for contraventions of workplace laws.
66.Nor was the applicant aware of any other findings of contravention by a court in respect of either respondent.
(e) Whether contraventions distinct or arose from a course of conduct
67.These matters have been addressed at [27]-[35] above.
(f) Size of the business and financial circumstances
68.Factors relating to a respondents particular circumstances include:
. . . the size and financial position of the contravening company; whether the company has been found to have engaged in similar conduct in the past; whether the company has improved or modified its compliance systems since the contravention; whether the company (through its senior officers) has demonstrated contrition and remorse; whether the company had disgorged any profit or benefit received as a result of the contravention, or made reparation; whether the company has cooperated with and assisted the relevant regulatory authority in the investigation and prosecution of the contravention; and whether the company has suffered any extra-curial punishment or detriment arising from the finding that it had contravened the law.[51]
[51]Australian Building and Construction Commission v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113, [104].
69.The size and financial circumstances of employers are not matters considered to be exculpatory of breaches of workplace laws.[52]
[52] Fair Work Ombudsman v Hiyi Pty Ltd [2016] FCCA 1634, [47].
70.The applicant submitted that these matters, should only be given limited weight (if any) having regard to the strong aggravating factors that were present, the gravity of the contraventions and the real need for both general and specific deterrence in this case.
71.While a respondent’s financial circumstances form part of the framework within which the question of penalty must be evaluated, impecuniosity is not a basis upon which a person who contravenes workplace laws can expect to be exonerated. In FWO v Promoting U Pty Ltd, Burchardt J recognised that:[53]
Parliament has set significant penalties for the sort of contraventions that the respondents engaged in and I do not think it is appropriate for the totality principle to operate simply to ensure that penalties are imposed in suitably insignificant amounts to meet the respondents’ capacity to pay.
[53] [2012] FMCA 58, [57].
72.No weight should be ascribed to the respondents’ capacity or incapacity to pay when there is no evidence which would support a finding that the respondents’ lack capacity to pay.[54] To the contrary, the available evidence before the court indicates such capacity. Zucco currently engages a workforce of up to 20 labour hire contractors. Although not employees, the fact that this workforce is engaged to perform work does suggest that the Zucco’s business’ operations continue and that it has opportunity for profitability. Further, property searches indicate that the second respondent is a joint proprietor of five properties in Victoria. To see that evidence in some context, the evidence also pointed to the second respondent as working in the fields alongside his employees.
[54]See North Shanghai, [2017] FCA 1301, [106]-[107]. Bromwich J however accepted that size and capacity to pay may be accepted as factors in mitigation.
73.The applicant submitted that it was not appropriate in this case for the court to reduce the penalty on the basis of apparent financial hardship. The applicant urged for a penalty reflecting the seriousness of the respondents’ conduct and which emphasised general deterrence.
(g) Deliberate nature of contraventions
74.The applicant relied upon the deliberate nature of the respondents’ conduct as being the most aggravating feature that was present in the case. Despite knowing their legal obligations respecting the obligation to pay minimum entitlements, the respondents deliberately underpaid the employees. Having done so and having been challenged on their compliance with applicable obligations, they deliberately sought to mislead the FWO, both before and after the proceeding had commenced.
75.Throughout the relevant period, the second respondent was aware of the employees’ minimum entitlements. From at least 4 September 2015, Zucco created pay records purporting to pay the minimum hourly wage for a casual general labourer under the Award, and used this same rate when ‘reverse engineering’ the gross weekly amounts to be paid to the employees. The applicant submitted that this rate had not been chosen coincidently, but rather that it had been deliberately applied where it was known by the respondents to constitute the minimum hourly rate payable under the Award. When asked about this, the second respondent said to Mr Yunus that he used that rate “just for my bookwork”.
76.I accept that the respondents made deliberate and conscious decisions to underpay the employees. I also accept that the respondents deliberately misled the FWO about the fact that the employees had been underpaid. This was done by creating and using the pay records with false hourly rates and false hours worked, and by the making of false statements to a FWO Inspector. The pay records appeared to comply with the minimum entitlements set by the Award for a causal employee engaged in general labouring duties.[55] The respondents made use of these pay records by providing them to the FWO in response to both Notices which, absent further evidence, gave an appearance of compliance.
[55] Apart from a narrow period.
77.The pay records were supplied in a repeated attempt to appease the FWO by giving the appearance that Zucco was complying with its obligations under workplace laws. The respondents persisted in the adoption of this stance throughout the course of the Investigation. The respondents’ admission of the true position did not occur until after the applicant had placed all of its evidence on liability and participated in mediation.
78.The second respondent made representations to the FWO that:
a)Zucco paid award rates;
b)he never told the employees they would be paid $16 per hour;
c)the employees never worked on public holidays;
d)the records which were provided to the FWO were either an accurate recording of the employees’ hourly rates and hours worked, or that they were not false or misleading;
e)the employees had received pay slips for most or all weeks; and
f)following their engagement, the employees and the second respondent had never had a further discussion about pay rates and had never queried their pay rates.
It is now admitted that these representations were not true.
79.The respondents were aware they were engaging in unlawful conduct. They had deliberately underpaid the employees and persistently attempted to deceive the FWO by reverse engineering the employees’ entitlements, maintaining the stance that the pay records were accurate and persisting in the adoption of that stance. The applicant submitted that the deceptive nature of the respondents’ conduct had been deliberate, and for that reason a highly aggravating feature of this proceeding.
(h) Contrition, corrective action and cooperation
80.While the respondents’ admissions and rectification should be taken into account in mitigation of penalty, this should, however, be balanced with the evidence of their conduct throughout the Investigation and in this proceeding. The fact is that the respondents persisted in their denial of liability in relation to contravening which was deliberate. There was force in the submission of Mr McDermott of counsel that the late intervention of a new solicitor had brought with it the need for frank recognition of the seriousness of the matter and the need to address it. It was, as he put it, a case in which a new solicitor had been appointed to take over the file and upon being served with the applicant’s evidence and returning from leave had taken immediate steps on 18 January 2018 to respond to the case in a qualitatively different manner to that of his predecessor. This intervention was to be to the respondents advantage in that it facilitated a complete re-evaluation of the position and the making of admissions, the repayment (with interest) of monies properly due to the employees and the implementation of a program to avoid further contraventions. As importantly, the admissions, albeit belated, served to avoid the significant cost of lengthy and complex litigation which in itself would have required the dedication of public resources and the consequential denial of scarce court resources to other litigants.
81.Despite some evidence of cooperation and corrective action by the respondents, this only occurred late in the day and as a result of having to confront their contravening conduct in this litigation. The applicants submitted that the respondents cooperation had been neither full nor of particular note. I agree that it should be seen more accurately as having occurred in response to service of all of the evidence which had been prepared, filed and served for the hearing. It was not, for example, forthcoming in response to either of the Notices. Despite warning, nor was it given in the course of the recorded interview. During that interview the second respondent had maintained a denial that the employees had been paid hourly rates of $16 and not $21 per hour, on the second occasion stating “Yes. 100 per cent not the case.” From my examination of the transcript, when given the opportunity to accept that there had been a discussion with an employee over the payslip and his entitlement to an hourly rate of $21, the second respondent repeatedly and falsely denied that any such conversation had occurred.
Contrition and corrective action
82.The court may take account of a suitable and credible expression of regret as indicating a willingness to facilitate the course of justice. [56] The applicant acknowledged that Zucco had rectified the underpayments to the employees, and taken steps to implement corrective practices in its business. Again, however, it was submitted that regard should be had to the context in which the corrective action was occurring. Again, it was said that while the respondents had had many opportunities to redress their contravening conduct and to alert the applicant to the falsity of the pay records, it was only in March 2018 that they made admissions.
[56]See North Shanghai, [2017] FCA 1301, [117]-[118] citing Cameron v The Queen (2002) 209 CR 339, [13]-[15].
83.I am prepared to infer that, had the applicant not commenced this proceeding, the respondents would not have embarked upon a course of corrective action. In truth, the respondents only engaged in corrective action in the two months immediately preceding this penalty hearing. And yet, a representative of Zucco had stated as early as July 2016 that she would look into the information provided by an Inspector in relation to record-keeping and would produce compliance records.
84.To the extent the applicant submitted that before the court there was no evidence of any remorse having been expressed by the respondents, I am prepared to consider their having taken steps to implement corrective practices as being evidence of some remorse. The applicant properly acknowledged that implementation of corrective practices was a step in the right direction. In fact, there was produced in evidence some ten certificates of completion showing that the second respondent had undertaken a large number of workplace related courses with the FWO.
Cooperation, admissions, and application of penalty discount
85.Where admissions are made, a respondent may be entitled to the benefit of a discount in penalty.[57] However, the scope for applying principles relevant to discount was addressed by the Full Court in Mornington Inn. Stone and Buchanan JJ stated that a discount should not be available:[58]
. . . simply because a respondent has spared the community the cost of a contested trial. Rather, the benefit of such a discount should be reserved for cases where it can be fairly said that an admission of liability: (a) has indicated an acceptance of wrongdoing and a suitable and credible expression of regret; and/or (b) has indicated a willingness to facilitate the course of justice.
[57] Fair Work Ombudsman v Jay Group Services Pty Ltd and Others [2014] FCCA 2869, [31].
[58] [2008] FCAFC 70, [74]-[76].
86.The parties were not in dispute as to the principles applicable to discounting. Although the respondents have now made full admissions of their respective contraventions and, while this indicates some acceptance of wrongdoing and has facilitated some degree of efficiency in the conduct of this proceeding, equally, there is no cogent evidence expressing regret. To the contrary, the respondents were uncooperative in the course of the Investigation. The respondents variously:
a)deliberately created and produced the false pay records;
b)did so with a view to creating the appearance of compliance;
c)produced those false pay records to the FWO;
d)participated in a recorded interview, in which they sought to perpetuate their misrepresentations to the FWO, despite being warned against the adoption of this course;
e)maintained their misrepresentations during the Investigation;
f)thereby put the applicant to the effort of undertaking a complex analysis of records, including issuing a statutory notice to produce to a non-party; and
g)made no admission of their contraventions until after the matter had been fully prepared for a liability hearing.
87.There was some force in the submission that the respondents recent co-operation and making of admissions should be viewed as an acceptance of the inevitable. However, I do consider that their agreement to the terms of the proposed orders are redolent of a genuine intention to facilitate the course of justice. In particular, the respondents are agreed that a notice should be publicly displayed at the workplace which does indicate their willingness to facilitate of the course of justice.
88.In all of the circumstances, the applicant submitted that the respondents’ admissions only justified a discount of 10% of the maximum penalty. The respondents contended for a discount of 15-20%.
89.While the parties were in dispute in relation to the appropriate discount, they were in agreement that earlier cases were not to be employed as having precedential status, but rather as providing some guideance as to appropriate penalty.[59] The point was usefully illustrated by Mr Tracey of counsel in contrasting a case involving perhaps two contraventions each of which was particularly egregious with another involving many contraventions but which concerned conduct that was, objectively, of far lesser significance. The process of evaluating penalty is fact intensive.
[59]Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8, [12]-[14] (Gray J), [86]-[87] (Buchanan J).
90.Counsel for the respondent pointed to the circumstance (which appeared not to be in issue) that the proposal for a 10% discount had been on the table from a time at or before mediation and that a larger discount was warranted having regard to the admissions of liability, the payment with interest of the underpayments and the series of corrective steps which had not merely been agreed, but had been progressively implemented. It is settled that a degree of discount may be seen as involving a pragmatic willingness on the part of FWO to encourage respondents to “given up the fight and free up the regulator’s resources for allocation to other investigations and enforcement litigation.”[60] Viewed from one perspective, a decision post-mediation to give no further allowance by way of discount to a respondent who has made admissions and then gone further and made reparation, enrolled in and completed courses and adopted the other measures required by FWO would seem somewhat inimical to the broader purposes of legitimate discounting practices.[61]
[60] See North Shanghai, [2017] FCA 1301, [118].
[61] Ibid, [2017] FCA 1301, [118] citing CFMEU Civil Penalties Case [47]-[48], [57]-[61], [65].
91.Also in favour of acceptance of the discount for which the respondents contend is that it was no part of the applicant’s case that the employees had not been paid for the hours which they worked. The case is of underpayment of minimum Award and related entitlements. In my opinion, the respondents are entitled to due recognition for each of those factors. The present case is not one of merely hollow promises being made by a person who admits to having been in contravention. It was not a case of zero restitution, zero co-operation and zero rectification.
(i) The need to ensure compliance with minimum standards
92.The applicant correctly submitted that ensuring compliance with minimum standards, both as to wages, statutory entitlements and record keeping is an important consideration in the present case. The court recognises the seriousness of the subject contraventions and in particular the gravity of the deliberate creation and use of false or misleading records. A stated object of the Act is the maintenance of an effective safety net of employer obligations and effective enforcement mechanisms.[62] Fundamental to the effectiveness of workplace regulation is that this safety net is extended to all employees, regardless of their visa status or nationality. Employees and regulators must be able properly to examine records so that they may determine, in a timely way, if an employer is complying with its safety net obligations.[63]
[62] Act, s 3.
[63]Fair Work Ombudsman v Kleen Group Pty Ltd & Anor [2016] FCCA 278, [9] citing Fair Work Ombudsman v Nerd Group Australia Pty Ltd & Anor (No. 3) [2012] FMCA 891. Although these decisions concerned a failure to produce records altogether, I accept that the same principles inform cases where an employer produces false and misleading records.
93.In this case, the Inspectors were unable to rely on Zucco’s pay records as they were not an accurate record of the entitlements being paid to the employees. This frustrated the FWO’s ability to investigate efficiently the employees concerns, thereby causing the Investigators to undertake extensive investigations and cross referencing of records. By contrast, the Investigators were assisted by the records which the employees and others kept of the days and hours they had worked. Those records could be relied upon for the purpose of calculating the entitlements that the employees were owed. The keeping of those records was not a task that the employees should have had to undertake. It is something that the Act requires of an employer and which Zucco did not perform.[64]
[64] Fair Work Ombudsman v Pulis Plumbing Pty Ltd [2017] FCCA 3013, [19].
94.The failure of the respondents to comply with the minimum legislative standards with respect to record keeping meant that the Investigators were required to undertake a complex analysis of records in order to determine the underpayments. For periods where the records of hours worked as kept by the employees were incomplete, the Investigators were unable to assess these accurately. In the result, it was necessary for those periods to be excluded entirely from the relevant period.
95.I accept that employees should be able to determine what entitlements they are receiving, and how those entitlements arise. Had the employees not requested their pay slips, they may never have been alerted to the respondents misconduct.
96.Consequently, the creation and production of the false pay records was part of a deliberate attempt by the respondents to avoid complying with the minimum protections afforded by the Act. The respondents’ conduct frustrated the ability of the employees to know their minimum entitlements, and hold their employer to account for its failure to provide these.[65] It also frustrated the ability of the FWO to investigate this matter efficiently, and without the employees’ evidence, may have rendered the respondents’ contravening conduct undetected. Their conduct was aggravating in these respects.
[65] Fair Work Ombudsman v Mai Pty Ltd [2016] FCCA 1481, [111].
(j) Deterrence
97.The need for specific and general deterrence is central to the imposition of a penalty under the Act: see, eg, DFWBII.[66] As stated above, the primary, if not whole, purpose of the imposition of civil penalties is to promote the public interest in compliance with an Act. So too, notions of punishment and rehabilitation would no longer seem relevant.[67]
[66] [2015] HCA 46, [55], [110].
[67] See North Shanghai, [2017] FCA 1301, [128]-[129].
98.The imposition of a civil penalty seeks to achieve this by attempting to put a price on a contravention that is sufficiently high so as to deter repetition, both by the contravener specifically and by others more generally where they might otherwise feel tempted to do so. Relatedly, a civil penalty must also “be fixed with a view to ensuring that the penalty is not such as to be regarded by [the] offender or others as an acceptable cost of doing business”.[68]
[68]Cth v FWBII at [110] citing Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20, [62]-[63].
Specific deterrence
99.In assessing the relevance of specific deterrence to appropriate penalties, the court should look at the attitude expressed by the respondents, including by looking to any remorse or contrition expressed and any steps they have taken to ensure that no future breaches will occur.[69] There was some force in the applicant’s submission that there was a lack of evidence of genuine remorse.
[69] Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union [2008] FCAFC 170, [37].
100.Yet there is evidence that the respondents have taken steps to promote future compliance with the Act, regulations and Award by Zucco’s business. However, specific deterrence is still a consideration attaching weight in this case. The respondents’ conduct was highly aggravating in that it involved deliberate and persistent deception which was directed toward the applicant in disregard of workplace obligations toward the employees. The evidence confirms that the respondent’s conduct was persistent, and that the corrective action referred to above only resulted from the applicant bringing this proceeding.
101.Seen in its proper context, Zucco continues to engage its farm labourers on a labour hire basis and has engaged at least one casual employee since the commencement of the Investigation in this matter. I accept that, as the respondents only undertook corrective action at an advanced stage of the proceeding, and that Zucco continues to employ people to work in its business, there is a need to send a strong message to the respondents that such contravening conduct will not be tolerated.
102.The need for the respondents to be deterred specifically from any future similar contravening conduct is an active consideration in this case. In evaluating specific deterrence, an assessment must be made of the risk of re-offending.[70] Yet it may be conceded in the respondents favour that their active engagement in what their counsel described as ‘re-education pathways’ was itself some proof that specific deterrence had already hit its mark in an effective way. Their repayment of the underpayments and their acceptance of the orders which are sought persuades me that the risk of re-offending is low. I am fortified in that conclusion by their yielding to the applicant’s demand that a notice publicising the minimum wages and other relevant information that is to be posted at their property. Furthermore, in the performance of the undertaking to pursue a re-education campaign, the second respondent has completed and produced certificates for having concluded quite a large number of workplace courses as required of him by the applicant.
[70] Ponzio v B&B Caelli Constructions Pty Ltd [2007] FCAFC 65, [93].
General deterrence
103.To serve usefully as a general deterrent, a civil penalty should be imposed at a level that is likely to act as a deterrent in preventing similar contraventions by like-minded individuals or organisations.[71] It should not be of such magnitude as to impose a crushing burden on a contravenor or to designate him or her a scapegoat.[72]
[71]Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249, [62]-[63] (Keane CJ, Finn and Gilmour JJ).
[72] Ponzio v B&B Caelli Constructions Pty Ltd [2007] FCAFC 65, [93].
104.General deterrence is an important factor in this proceeding. There is a real need to send a message both to the community, and employers, that employees must be provided with the correct entitlements and proper records. The importance of employers creating and keeping true records must be recognised and the sanctions for engaging in dishonest record creation must be properly understood. Employers should be in no doubt that they have a positive obligation to ensure that they comply with the obligations which they owe to their employees under the law. Unless rights enshrined in legislation are respected and observed, the risk that they will be rendered hollow is immediate.[73]
[73] Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557, [29].
105.As concerns the relevance of general deterrence to this case, the applicant relied on data in the FWO’s Industry Profile. This Industry Profile reveals that the highest complaints in the agriculture, forestry and fishing industry were in relation to underpayments of the minimum hourly rate. It also revealed for these industries, of which horticulture is a part, that:
a)underpayments of the minimum hourly rate accounted for 28% of the allegations received by the FWO;
b)almost half (43.8%) of disputes notified to the FWO involved a visa worker (compared to only 16.1% across all industries).
These patterns confirm the need for, and so inform the importance of, general deterrence in this industry when imposing penalties for contravening conduct of the kind which is now admitted in this case.[74]
[74] Cf North Shanghai, [2017] FCA 1301, [135], [199].
106.More broadly, it is also important that employers across all industries are left in no doubt of their positive obligation to keep accurate records. Accurate records are the essential foundation of any assessment by employers, employees and regulators of what employees’ entitlements are, and whether they have been observed. The absence of such records serves to undermine the objects of the Act, including that of providing mechanisms for maintaining the guaranteed safety net of entitlements.
107.The need for general deterrence particularly in respect of contraventions involving the creation and production of false or misleading records is no less significant where the breach of safety net provisions affects persons working in Australia on visas or where additional elements, such as vulnerability, are present.[75]
[75]North Shanghai, [135]; cf Fair Work Ombudsman v Rubee Enterprises Pty Ltd [2016] FCCA 3456, [106].
108.I accept that it is necessary that the penalty to be imposed reflects the strong need for general deterrence in circumstances where employers may be tempted to prey on the vulnerability of employees, whether by reason of their migratory status or lack knowledge of their legal entitlements. Although it was not the subject of submissions (and perhaps for good reason), I note that the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 commenced operation on 15 September 2017 and so post-dated the subject contraventions.[76]
[76] Cf North Shanghai [2017] FCA 1301, [226].
Totality and recommended penalty
109.Parties to civil penalty proceedings can make submissions which identify a range of penalties, nominate specific penalties in respect of particular contraventions and/or urge the court to adopt an agreed position on penalties. In DFWBII, French CJ, Kiefel, Bell, Nettle and Gordon JJ held at [60]:
As has been seen, under the BCII Act, the Director's statutory functions include monitoring and promoting appropriate standards of conduct by building industry participants generally. It is, therefore, naturally to be assumed that the Director will fashion penalty submissions with an overall view to achieving that objective and thus perhaps, if not probably, with one eye to considerations beyond the case in hand. That consideration, however, supports, rather than detracts from, the propriety of a court receiving joint (or separate) submissions as to facts and penalty and imposing the proposed penalty if persuaded that it is appropriate. As was emphasised in NW Frozen Foods, it is the function of the relevant regulator to regulate the industry in order to achieve compliance and, accordingly, it is to be expected that the regulator will be in a position to offer informed submissions as to the effects of contravention on the industry and the level of penalty necessary to achieve compliance.” (footnotes omitted)
110.The respondents conduct in this case was aggravating and serious. The applicant proposed a range of penalties for each recommended group of contraventions. These are set out in the table at Annexure A. In summary, for the different groups of contraventions the applicant recommended various penalty ranges including:
a)high range penalties (between 70 to 90% of the available maximum) for: (i) the grouped false records contraventions (s 535(1) of the Act and reg 3.44(1) of the Regulations); (ii) each contravention of making use of the false records (reg 3.44(6) of the Regulations); and (iii) the underpayment of the casual loading (s 45 of the Act);
b)medium, and medium-to-high, range penalties of between 40% and 70% for all remaining contraventions.
111.The same penalty ranges were recommended for both respondents. This was so on the basis that the second respondent was Zucco’s primary actor and decision maker. In other words, the second respondent was centrally involved in all contraventions. As noted, the proposed ranges of aggregate penalties covering all contraventions were:
a)Zucco: $140,130 to $162,810
b)the second respondent: $28,026 to $32,562
112.These figures represent approximately 56% to 65% of the available maximum penalties that may be imposed against each respondent. The applicant submitted that these ranges reflected an appropriate and proportionate penalty for each contravention when assessed separately. The respondents did not cavil with the applicants classification of the grading of penalties of medium-high or high for the contraventions.
Instinctive synthesis
113.Upon undertaking its consideration of a penalty for each contravention, the court must then reconsider the aggregate of those penalties in determining whether it is an appropriate response to the conduct which led to the breaches and that it is not oppressive or crushing.[77] The penalty must nevertheless bear relativity to the seriousness of the conduct engaged in by the respondents.[78] The totality principle requires that, after determining an appropriate penalty for the subject contraventions and upon consideration of relevant factors in accordance with principle, the court should then review the total of the penalties and consider whether the aggregate is just and appropriate.[79] I have done so and indeed at some length. I do not ignore that there is no evidence of the respondents having engaged in similar conduct previously or of having otherwise been found in contravention of workplace laws.
[77]See Kelly at [30]; Australian Ophthalmic Supplies at [23] (Gray J), [71] (Graham J), [102] (Buchanan J).
[78]Fair Work Ombudsman v Rubee Enterprises Pty Ltd [2016] FCCA 3456, [12]; Fair Work Ombudsman v Promoting U Pty Ltd [2012] FMCA 58, [57].
[79]Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd [2006] FCA 21, [82] (Goldberg J).
114.The applicant submitted that the total penalties proposed were an appropriate response to the serious contravening conduct in this case and that, accordingly, there was no warrant to reduce them by application of the principle of totality. Relevantly, there is no evidence to suggest that the proposed penalties would be crushing on the respondents. To accept as much is to reinforce the conclusion that the respondents’ financial circumstances are not exculpatory of breaches of workplace laws. It is not to say that the respondents should be sanctioned by the imposition of maximum penalties because they may not be crushed by them.
115.I have examined each of the matters upon which submissions were made and accept that heavy penalties are appropriate when dealing with conduct which is shown to be deliberate and persistent. The maximum penalties for contraventions of the kind in issue are heavy indeed. So too, are the penalties within the ranges as suggested by the applicant. They are of a magnitude which in and of themselves should present a very real measure of general deterrence and that is no bad thing. While the many authorities to which I was referred on the question of penalty were not to be treated as authority binding the appropriate exercise of a statutory discretionary power to impose a civil penalty, the cases in which a 10% discount involved circumstances where there had been a complete lack of remorse, a failure to make reparation and a high degree of culpability. Upon my reconsideration of the aggregate of the applicable penalties, and the range of medium to heavy recommendations which are made and accepted, I conclude that an appropriate response is to apply a 20% discount to the sum of those penalties. Had the respondents not proactively responded to their decision in the manner described above, I would have considered a 20% discount as unwarranted.[80] I do consider that penalties of this magnitude will operate both by way of specific deterrence on the respondents and as general deterrence in their industry.
[80]North Shanghai, [2017] FCA 1301, [120], [209]-[210]. There Bromwich J was troubled by the parties’ agreement to such a discount but conscious that the court should be slow to interfere with agreed penalties. His Honour observed his concern in relation to an agreed 20% discount where, had the matter gone to trial in the absence of any admissions, and liability proven, the maximum penalty may well have been appropriate.
116.I do not consider that such penalties would be seen as merely a cost of doing business. For the sake of comparison, Zucco’s penalty is nearly twelve times the amount of the underpayments and, correspondingly, the second respondent is subject to a further penalty which is more than double the aggregate of those underpayments.
Conclusion
117.The court has a wide discretionary power to make declarations.[81] I accept the applicant’s submission that such declarations are appropriate and that a public interest is served in making them in cases of this kind. The making of declarations will assist in educating employers about their obligations to ensure that their employees are paid their proper entitlements and that their record keeping obligations are adhered to. They will provide due warning of the consequences of a failure to meet those obligations. The making of declarations also serves to mark the court’s disapproval of the contravening conduct.
[81]Federal Circuit Court Act 1999, s 16; see also ACCC v Dataline.net.au Pty Ltd (2006) 236 ALR 665; ACCC v Yellow Page Marketing BV (No 2) [2011] FCA 352.
118.There will be orders and declarations accordingly.
I certify that the preceding one hundred and eighteen (118) paragraphs are a true copy of the reasons for judgment of Judge A Kelly.
Date: 16 May 2019
ANNEXURE A: Applicant’s recommended grouping and penalty ranges
| Contravention | Nature of Grouping | Maximum Penalty | 10% Discount | Penalty range | Penalty amounts after discount and grouping | |||
| First Respondent | second Respondent | First Respondent | second Respondent | First Respondent | second Respondent | |||
| Failure to Pay Minimum Rates of Pay under the Award – section 45 of the FW Act | Minimum Rates of Pay | $54,000 | $10,800 | $48,600 | $9,720 | Medium - high 60% - 70% | $29,160 – $34,020 | $5,832 –$6,804 |
| Failure to Pay Public Holiday Rates of Pay under the Award – section 45 of the FW Act | Public Holiday Rate | $54,000 | $10,800 | $48,600 | $9,720 | Medium | $19,440 – $24,300 | $3,888 – $4,860 |
| Failure to Pay Casual Loading under the Award – section 45 of the FW Act | Casual Loading | $54,000 | $10,800 | $48,600 | $9,720 | High 70% - 80% | $34,020 – $38,880 | $6,804 – $7,776 |
| Requirement to keep records – section 535(1) of the FW Act – rate of remuneration | Failure to keep accurate employee records and create false records | $27,000 | $5,400 | $24,300 | $4,860 | High 80% - 90% | $19,440 – $21,870 | $3,888 – $4,374 |
| Requirement to keep records – section 535(1) of the FW Act –hours worked | ||||||||
| Creation of false or false or misleading records – Regulation 3.44(1) of the FW Regulations – rate of remuneration | ||||||||
| Creation of false or false or misleading records – Regulations 3.44(1) of the FW Regulations – hours worked | ||||||||
| Use of entry in false or misleading record – Regulation 3.44(6) of the FW Regulations – production in response to May NTP | Make use of false employee records (May NTP) | $18,000 | $3,600 | $16,200 | $3,240 | High 80% - 90% | $12,960 –$14,580 | $2,592 – $2,916 |
| Use of entry in false or misleading record – Regulation 3.44(6) of the FW Regulations – production in response to July NTP | Make use of false employee records (July NTP) | $18,000 | $3,600 | $16,200 | $3,240 | High 80%-90% | $12,960 –$14,580 | $2,592 – $2,916 |
| Failure to give pay slips – section 536(1) of the FW Act | Pay slips | $27,000 | $5,400 | $24,300 | $4,860 | Medium 50% - 60% | $12,150-$14,580 | $2,430 –$2,916 |
| Total | $252,000 | $50,400 | $226,800 | $45,360 | NA | $140,130 – $162,810 | $28,026 – $32,562 | |
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