Fair Work Ombudsman v Zurel Pty Ltd
[2020] FCCA 2884
•26 October 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v ZUREL PTY LTD & ANOR | [2020] FCCA 2884 |
| Catchwords: INDUSTRIAL LAW – Application for civil penalty – penalty hearing – failure to satisfy Compliance Notice under Fair Work Act 2009 (Cth) – agreement on penalty and necessary declarations – appropriate penalty. |
| Legislation: Fair Work Act 2009 (Cth), ss.45, 535, 536, 539, 545, 546, 550, 557, 716 General Retail Industry Award 2010 Fair Work Regulations 2009 (Cth), reg.3.46 |
| Cases cited: Fair Work Ombudsman v Galb Pty Ltd & Anor [2020] FCCA 2712 Construction Forestry Maritime Mining and Energy Union v Milin Builders Pty Ltd [2019] FCA 1070 BlueScope Steel Limited v The Australian Worker’s Union [2019] FCA 182 Commonwealth of Australia v Director Fair Work Building Industry Inspectorate (2015) 258 CLR 482 Fair Work Ombudsman v HSCC Pty Ltd [2020] FCA 655 Fair Work Ombudsman v Absynthe Restaurant Pty Ltd & Anor [2015] FCCA 58 Kelly v Fitzpatrick [2007] FCA 1080 Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | ZUREL PTY LTD (ACN 159 273 677) |
| Second Respondent: | BAN TIEK CHEE |
| File Number: | MLG 339 of 2020 |
| Judgment of: | Judge O'Sullivan |
| Hearing date: | On the papers |
| Date of Last Submission: | 4 September 2020 |
| Delivered at: | Melbourne |
| Delivered on: | 26 October 2020 |
REPRESENTATION
| Solicitors for the Applicant: | Fair Work Ombudsman |
| Solicitors for the First Respondent: | Contact Lawyers Pty Ltd |
| Solicitors for the Second Respondent: | Contact Lawyers Pty Ltd |
ORDERS
THE COURT DECLARES THAT:
The first respondent contravened:
(a)section 716(5) of the Fair Work Act 2009 (Cth) (“the FW Act”) by failing to comply with the Compliance Notice;
(b)section 535(1) of the FW Act by failing to make and keep employee records prescribed by regulation 3.32 and regulation 3.33(1) of the Fair Work Regulations 2009 (“FW Regulations”); and
(c)section 536(1) of the FW Act by failing to give pay slips within one working day of payment.
The second respondent was involved, within the meaning of section 550 of the FW Act, in the each of the contraventions by the first respondent of sections 716(5), 535(1) and 536(1) of the FW Act referred to in paragraph 1 above.
THE COURT ORDERS BY CONSENT THAT:
Pursuant to section 545(1) of the FW Act, the first respondent take the steps that were required by the Compliance Notice within 28 days of this order, by:
(a)calculating the outstanding entitlements that it was required to pay the Employee including superannuation;
(b)paying the outstanding entitlements it was required to pay the Employee referred to in paragraph 3(a) above, to the Fair Work Ombudsman (“FWO”) (on behalf of the Employee);
(c)paying the additional superannuation contributions it was required to pay on the outstanding entitlements referred to in paragraph 3(a) above as required by clause 22.2 of the General Retail Industry Award 2010; and
(d)preparing and producing to the FWO, a schedule outlining its calculation of the outstanding entitlements it was required to pay the Employee referred to in paragraph 3(a) above, and providing proof that the outstanding entitlements were rectified as set out in paragraphs 3(b) and 3(c);
Pursuant to section 547(2) of the FW Act, the first respondent pay interest on the amounts owed to the Employee pursuant to paragraph 3(a) above, to the FWO within 28 days of this order.
The FWO distribute to the Employee the amounts paid pursuant to paragraphs 3(a) and 4 above within 60 days of the payment being made.
Pursuant to section 546 of the FW Act:
(a)the first respondent pay pecuniary penalties of $36,146.25 to the Commonwealth for the contraventions set out in paragraph 1 within 28 days of this order;
(b)the second respondent pay pecuniary penalties of $7,229.25 to the Commonwealth in respect to his involvement, within the meaning of section 550 of the FW Act, in the contraventions set out in paragraph 2 above.
The FWO have liberty to apply on seven (7) days’ notice in the event that any of the above orders are not complied with.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT Melbourne |
MLG 339 of 2020
| Fair Work Ombudsman |
Applicant
And
| Zurel Pty Ltd(ACN 159 273 677) |
First Respondent
| Ban Tiek Chee |
Second Respondent
REASONS FOR JUDGMENT
Introduction
“[Compliance Notices] are designed to provide a simple and cost effective way to ensure compliance, whilst educating employers. Most employers would welcome a [Compliance Notice] rather than a prosecution”[1]
[1] See Fair Work Ombudsman v Galb Pty Ltd & Anor [2020] FCCA 2712 at [24].
There are potentially serious consequences for failing to abide by a compliance notice issued under s.716 of the Fair Work Act 2009 (Cth) (“the FW Act”) in circumstances where compliance in the first place would have avoided the consequences of failing to heed the warning these notices provide. This is a case where that warning went unheeded.
On 3 February 2020 the Fair Work Ombudsman (“the applicant”) commenced proceedings by application and statement of claim against Zurel Pty Ltd (“the first respondent”) and Ban Tiek Chee (“the second respondent”).
The applicant brought proceedings against the first respondent (who operated a retail store selling women’s clothing at Melbourne Central) and its director, (the second respondent), following an investigation in 2019.
The investigation by the applicant concerned possible breaches of the FW Act and the General Retail Industry Award 2010 (“the Award”) by the first respondent concerning one of its employees between May 2018 and June 2019.
The applicant’s investigation led to a compliance notice (pursuant to s.716 of the FW Act) being issued to the first respondent (“the Notice”).
The first respondent did not comply with the Notice and the applicant commenced these proceedings for declarations against both respondents, orders under s.545 of the FW Act to remedy underpayments to the employee affected and civil penalties.
When the proceedings first came before the Court on 10 March 2020 the application and statement of claim had been served on the respondents. The applicant was represented and the second respondent sought to appear on behalf of both respondents. Orders were made for the first respondent to engage solicitors, file a defence and the matter was listed for further directions on 15 May 2020. The further directions hearing was then vacated as there were concerns about compliance by the respondents with those orders. The respondents then engaged solicitors, Contact Lawyers, who filed a notice of address for service for the first and second respondents on 30 July 2020.
On 31 July 2020, and by consent application on behalf of all parties, the following orders were made:
“THE COURT ORDERS BY CONSENT THAT:
1.By 14 August 2020, the parties file a statement of agreed facts.
2.By 4 September 2020, the applicant file and serve its submissions and any affidavit material upon which it seeks to rely, on the issue of penalty.
3.By 25 September 2020, the first and second respondents file and serve their submissions and any affidavit material upon which they seek to rely, on the issue of penalty.
4.By 9 October 2020, the applicant file and serve any submissions and any affidavit material in reply upon which it seeks to rely, on the issue of penalty.
5.…
6.The matter be adjourned to 13 November 2020 commencing at 10:00 am for a penalty hearing (with an estimated hearing time of 1 day) at the Federal Circuit Court of Australia at Melbourne.
7.The parties have liberty to apply.
AND THE COURT NOTES THAT:
A.The first and second respondents admit to the matters alleged in the statement of claim filed on 31 January 2020.
B.The parties agree that the matter proceed directly to a hearing on penalty.
…”
Ultimately, after the parties had filed a statement of agreed facts and the applicant had filed an affidavit and an outline of submissions the proceedings was fixed for a penalty hearing on 13 November 2020. Then on 16 October 2020 the parties requested the Court consider their agreed position on the appropriate penalty for the admitted contraventions on the papers and vacate the penalty hearing fixed for 13 November 2020. Accordingly, orders were made on 19 October 2020 to facilitate the disposition of the matter on the papers in accordance with the agreement of the parties.
Material relied on
The applicant relied upon the following documents:
a)Application and Statement of Claim filed on 3 February 2020;
b)Statement of Agreed Facts filed on 14 August 2020;
c)Outline of Submissions filed 4 September 2020;
d)Affidavit of Luke Thomas filed on 4 September 2020.
The respondents relied upon the following documents:
a)Statement of Agreed Facts filed on 14 August 2020.
Agreed Facts
On 14 August 2020 the parties filed a Statement of Agreed Facts (“S.O.A.F.”) which outlined the admitted contraventions, agreed declarations and orders. The S.O.A.F. is annexed and marked as Annexure A to these reasons.
The S.O.A.F. can be summarised as follows:
a)around July 2019 the applicant conducted an investigation into the first respondent;
b)the first respondent admits to contravening the Award in respect of the employee;
c)on 24 October 2019 the applicant gave the first respondent the Notice;
d)the Notice required the first respondent to take action to remedy the effects of the contraventions and to produce evidence of their compliance by:
(i)calculating the amounts, including superannuation, that should have been paid for hours worked by the employee;
(ii)making payment to the employee in the amount of the difference between what the employee was entitled to be paid and what the employee was actually paid;
(iii)preparing a schedule outlining the details of the employee including the amounts calculated and amounts paid to the employee;
(iv)produce evidence of compliance with the Notice.
e)the first respondent did not comply with the Notice by 21 November 2019.
f)the first respondent also contravened the FW Act by:
(i) failing to keep records in contravention of s.535(1);
(ii) failing to provide pay slips in contravention of s.536(1);
g)the parties seek declarations that the second respondent contravened the FW Act:
(i)because of his involvement in contravention of s.716(5) by the first respondent; and
(ii)that he is taken to have been involved in the contraventions of the first respondent in contravention by virtue of s.550.
Agreed penalty
Given the S.O.A.F. and the applicant’s submissions this is a matter where the contraventions have been admitted and there is agreement not only on the necessary declarations that should be made to record those contraventions[2] but also the appropriate penalties that should be imposed for that conduct.
[2] See Construction Forestry Maritime Mining and Energy Union v Milin Builders Pty Ltd [2019] FCA 1070 (Milin Builders) at [73] to [98] on power to grant declaratory relief that does nothing more than record respondents’ conduct was engaged in contravention of a statute.
The Court’s role when dealing with a civil penalty case, where the parties have agreed on the pecuniary penalty, is not to simply “rubber stamp” that agreed penalty.[3] That said, subject to the Court being satisfied that the proposed penalty is appropriate[4], it is accepted that it is “highly desirable in practice” for the Court to impose the proposed penalty[5]. The declaratory relief sought, which is agreed, is appropriate if it is to mark disapproval of the conduct or realise some broader educative or deterrent effect.[6]
[3] BlueScope Steel Limited v The Australian Worker’s Union [2019] FCA 182 at [3]
[4] See Commonwealth of Australia v Director Fair Work Building Industry Inspectorate (2015) 258 CLR 482 of [47] to [48].
[5] See Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at [58]
[6] See Milin Builders at [98] and applicant’s submissions dated 4 September 2020.
The proposed penalty will be consistent with these principles if it falls within the range of penalties that the Court could, in the exercise of its discretion, impose having regard to the facts and circumstances of the contraventions and the legal principles that apply to the fixing of penalties for civil penalty provisions.[7] When considering the appropriateness of the agreed penalties it is important to note the maximum penalty remains a “yardstick” against which the process of assessment is to proceed and the primary purpose of any imposition of penalty is deterrence.
[7] See Fair Work Ombudsman v HSCC Pty Ltd [2020] FCA 655 at [26] and [28]
Relevant provisions of FW Act
Section 716 of the FW Act provides:
“716 Compliance notices
Application of this section(1) This section applies if an inspector reasonably believes that a person has contravened one or more of the following:
(a)a provision of the National Employment Standards;
(b) a term of a modern award;
…
Giving a notice
(2) The inspector may, except as provided by subsection (4), give the person a notice requiring the person to do either or both of the following within such reasonable time as is specified in the notice:
(a) take specified action to remedy the direct effects of the contravention referred to in subsection (1);
(b) produce reasonable evidence of the person’s compliance with the notice.
(3) The notice must also:
(a) set out the name of the person to whom the notice is given; and
(b) set out the name of the inspector who gave the notice; and
(c) set out brief details of the contravention; and
(d) explain that a failure to comply with the notice may contravene a civil remedy provision; and
(e) explain that the person may apply to the Federal Court, the Federal Circuit Court or an eligible State or Territory Court for a review of the notice on either or both of the following grounds:(i) the person has not committed a contravention set out in the notice;
(ii) the notice does not comply with subsection (2) or this subsection; and(f) set out any other matters prescribed by the regulations.
…
Relationship with civil remedy provisions
(4A) An inspector must not apply for an order under Division 2 of Part 4‑1 in relation to a contravention of a civil remedy provision by a person if:
(a) the inspector has given the person a notice in relation to the contravention; and
(b) either of the following subparagraphs applies:
(i) the notice has not been withdrawn, and the person has complied with the notice;
(ii) the person has made an application under section 717 in relation to the notice that has not been completely dealt with.Note: A person other than an inspector who is otherwise entitled to apply for an order in relation to the contravention may do so.
(4B) A person who complies with a notice in relation to a contravention of a civil remedy provision is not taken:
(a) to have admitted to contravening the provision; or
(b) to have been found to have contravened the provision.Person must not fail to comply with notice
(5) A person must not fail to comply with a notice given under this section.
Note: This subsection is a civil remedy provision (see Part 4‑1).
(6) Subsection (5) does not apply if the person has a reasonable excuse.”
The issuing of compliance notices is a power given to Fair Work Inspectors which is designed to be a method by which non-compliance with obligations imposed by the FW Act can be enforced as an alternative to court proceedings.[8] The failure to comply with a notice given under s.716 of the FW Act is a civil remedy provision. “Civil remedy provision” is defined in s.539(1) to mean the provisions referred to in column 1 of an item in the table in s.539(2) of the FW Act.
[8] See Fair Work Ombudsman v Absynthe Restaurant Pty Ltd & Anor [2015] FCCA 58 at [36].
Section 45 of the FW Act is included as an item in that table and, therefore, is also a “civil remedy provision”. Section 45 of the FW Act provides that a “person must not contravene a term of a modern award”. In this case the relevant “modern award” is the Award.
The consequences of a person’s contravening a modern award, and hence s.45, are provided for in Part 4-1 of the FW Act. Relevant to the case before the Court is s.546(1) of the FW Act which provides that this Court (among others) may “on application, order a person to pay a pecuniary penalty that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision”.
It is not only the person who has contravened a civil remedy provision who may be liable to an order for the payment of a pecuniary penalty as s.550 of the FW Act provides that:
“Involvement in contravention treated in same way as actual contravention
(1) A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.
(2) A person is involved in a contravention of a civil remedy provision if, and only if, the person:
(a) has aided, abetted, counselled or procured the contravention; or
(b) has induced the contravention, whether by threats or promises or otherwise; or
(c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d) has conspired with others to effect the contravention.”
Finally, s.536 of the FW Act provides:
“(1) An employer must give a pay slip to each of its employees within one working day of paying an amount to the employee in relation to the performance of work.
(2) The pay slip must:
(a) if a form is prescribed by the regulations—be in that form; and
(b) include any information prescribed by the regulations.”
The information that must be included in pay slips has been prescribed by regulation 3.46 of the Fair Work Regulations 2009 (Cth), and for the purposes of these proceedings so far as is presently relevant in relation to regulation 3.46(5), the detail that must be provided includes the amount of the superannuation contribution, the name and number of the fund to which it was made.
Approach to penalty proceedings
The applicant’s standing to commence these proceedings was not in dispute. The power for the Court to order the imposition of a penalty for contraventions of the FW Act arises under s.546 FW Act.
The approach of the Court in determining penalties involves the following steps:
a)the Court is to identify the separate contraventions involved. For the purposes of s.539(2), each contravention of an obligation located in the FW Act constitutes a separate contravention of a civil remedy provision of the FW Act;
b)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)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. Importantly, this third task is distinct from, and in addition to, the final application of the “totality principle”;
d)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)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. In doing so, the Court should apply an “instinctive synthesis” in making this assessment. This final step is commonly known as the “totality principle”.
The process set out above is facilitated by addressing the non-exhaustive considerations Tracey J identified in Kelly v Fitzpatrick [2007] FCA 1080, which were as follows:
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 respondents;
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 senior management was involved in the breaches;
i)whether the party committing the breach had exhibited contrition;
j)whether the party committing the breach had taken corrective action;
k)whether the party committing the breach had co-operated with the enforcement authorities;
l)the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
m)the need for specific and general deterrence.
Consideration
I have considered the written submissions in relation to each of the relevant factors for determining the appropriate penalty in this case. The applicant’s submissions set out the appropriate grouping of and maximum penalties for the contraventions in this matter.[9]
[9] See paragraphs [14] to [17].
The nature, extent and circumstances of the conduct which led to the breaches
The applicant’s written submissions filed on 4 September 2020 addressed this consideration at paragraphs [20] to [31].
The applicant in their written submission sets out the respondents’ contravention of s.716(5) of the FW Act. As a result of the applicant issuing the Notice and the respondents’ failure to comply with that Notice, led to the applicant issuing proceedings against the respondents.
The applicant in their written submissions also addressed the respondents’ contravention of s.535(1) of the FW Act by failing to provide pay slips or keep records of the employee.
The vulnerability of the employee was also addressed in the applicant’s written submissions. The employee was 20 years old when she commenced employment, and therefore the Court acknowledges that young employees may be classed as more vulnerable to contraventions in the workplace.[10]
[10] See Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290 at [24], [26].
The nature and extent of any loss or damage sustained as a result of the breaches
The applicant did not address this consideration in their submissions. However, it appears uncontroversial that the employee concerned is still waiting for what should have been paid in the first place.
Whether there has been similar previous conduct by the respondents
The applicant did not address this consideration in their submissions and there is no evidence of similar previous conduct.
The size of the business enterprise involved
The applicant’s written submissions filed on 4 September 2020 address this consideration at paragraphs [32] to [34].
The applicant accepted given those matters that the proposed penalties imposed should not be “crushing or oppressive” to the respondents.
Whether or not the breaches were deliberate
The applicant did not address this consideration in their submissions.
Whether senior management was involved in the breaches
The applicant also did not address this consideration in their submissions.
Contrition, corrective action and co-operation
The applicant’s written submissions filed on 4 September 2020 address this consideration at paragraphs [35] to [38].
The applicant acknowledges that the respondents have cooperated by admitting the contraventions and signing the SOAF and therefore avoiding taking up Court time with a liability hearing. There is also the respondents’ agreement to the penalties sought to take into account.
The applicant submits however, that as the respondents have not provided evidence of rectification to the employee of the amount outstanding pursuant to the Notice this should be an aggravating factor.
Therefore, under the circumstances the applicant submits that only a discount of 15% on penalties would be appropriate to apply to the respondents.
The need to ensure compliance with minimum standards
The applicant’s written submissions filed on 4 September 2020 address this consideration at paragraphs [39] to [42].
The applicant submitted that the importance of ensuring compliance with minimum standards of proper record keeping and pay slips should be taken into account. Also the seriousness of the respondents’ non compliance of the Notice should be reflected in the level of penalties to be imposed against the respondents.
The need for specific and general deterrence
The applicant’s written submissions filed on 4 September 2020 address this consideration at paragraphs [43] to [47].
The applicant submitted that the penalties imposed on the respondents must be at an amount to show that this behaviour is unacceptable and will not be tolerated by the Court, and also to serve as a deterrent to any future contravenors.
Appropriate penalties
The applicant submitted (and the respondents agreed) the following penalties were appropriate:
a)for the first respondent:
Contravention
Maximum Penalty
Discount
Penalty
Penalty Amount
s.716(5)
$31,500
15%
50%
$13,387.50
s.535(1)
$31,500
15%
50%
$13,387.50
s.536(1)
$31,500
15%
50%
$13,387.50
Total:
$40,162.50
b)for the second respondent:
Contravention
Maximum Penalty
Discount
Penalty
Penalty Amount
s.716(5)
$6,300
15%
50%
$2,677.50
s.535(1)
$6,300
15%
50%
$2,677.50
s.536(1)
$6,300
15%
50%
$2,677.50
Total:
$8,032.50
Totality principle
The applicant’s submissions address this issue at paragraph [49] to [52] and in light of those submissions I accept a further reduction of 10% is appropriate.
Conclusion
The failure to comply with the Notice properly issued by the applicant in the course of its investigations and the discharge of its statutory functions is serious. Recipients of such notices should be left under no misapprehension about their obligations to comply with those notices.
The applicants position (which was adopted by the respondents) was that after the application of the totality principle the Court should impose a total penalty for the contraventions at paragraph 46(a) of $36,146.25 and for those at paragraph 46(b) $7,229.25.
Therefore, as the Court:
a)is directed by the relevant authorities to consider what is appropriate in all the circumstances of this case; and
b)in its discretion in relation to penalty is not fettered by a checklist of mandatory criteria; and
c)notes the parties have filed the S.O.A.F., and agreed on the appropriate penalties for the contravening conduct; and
d)is satisfied in the light of the above consideration the penalties set out above are just and appropriate;
there will be orders as set out in the beginning of these reasons for decision.
I certify that the preceding fifty (50) paragraphs are a true copy of the reasons for judgment of Judge O'Sullivan
Associate:
Date: 26 October 2020
Annexure A
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