Finberg v Efron (No 2)

[2016] FCCA 1184

FEDERAL CIRCUIT COURT OF AUSTRALIA

FINBERG v EFRON (No 2) [2016] FCCA 1184

Catchwords:
INDUSTRIAL LAW – determination of appropriate penalties pursuant to s.545 of the Fair Work Act 2009 (“the Act”) for contraventions of Legal Services Award 2010 (“the Award”) and the Act.

Legislation:

Fair Work Act 2009 (Cth), ss.45, 90, 535, 536, 539, 546, 557

Legal Services Award 2010 (Cth), cl.35.3
Crimes Act 1914, s.4AA

Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; (2008) 246 ALR 35; [2008] FCAFC 8
Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228; [2001] FCA 1364
Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128
Fair Work Ombudsman v Contracting Plus Pty Ltd & Anor [2011] FMCA 191
Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557
Fair Work Ombudsman v Orwill Pty Ltd & Ors [2011] FMCA 730
Fair Work Ombudsman v Roselands Fruit Market Pty Ltd & Anor [2010] FMCA 599
Finance Sector Union v Commonwealth Bank of Australia [2005] FCA 1847; (2005) 224 ALR 467
Hansen v Mt Martha Community Learning Centre Inc (No 2) [2015] FCA 1283
Kavassilas v Migration Training Authority Pty Ltd(No 2) [2012] FMCA 208
Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70
Olsen v Sterling Crown Pty Ltd [2008] FMCA 1392
Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union [2008] FCAFC 170
Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; (2007) 162 IR 444; [2007] FCAFC 65
Re Trade Practices Commission v CSR Limited (1991) 13 ATPR 41-076; [1990] FCA 521
Sayed v Construction, Forestry, Mining and Energy Union [2016] FCAFC 4
Workplace Ombudsman v Saya Cleaning Pty Ltd [2009] FMCA 38

Applicant: SAUL FINBERG

Respondent: GRAEME EFRON

File Number: MLG 913 of 2014

Judgment of: Judge Jones

Hearing date: 11 March 2016

Date of Last Submission: 18 March 2016

Delivered at: Melbourne

Delivered on: 17 May 2016

REPRESENTATION

Counsel for the Applicant: Mr Slomim

Solicitors for the Applicant: KWS Legal

Counsel for the Respondent: Mr Polichtuk

Solicitors for the Respondent: Efron & Associates

ORDERS

1. The Respondent pay the Applicant pursuant to s.546 of the Fair Work Act 2009 the sum of $22,100.00 within 21 days of this Order.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 913 of 2014

SAUL FINBERG

Applicant

And

GRAEME EFRON

Respondent

REASONS FOR JUDGMENT

Introduction

1. This is an application to determine an appropriate penalty in relation to found breaches/contraventions of the Fair Work Act 2009 (“the Act”) and the Legal Services Award 2010 (“the Award”).

2. On 11 September 2015, I made the following declarations:[1]

   [1] Finberg v Efron [2015] FCCA 2470.

   (1)The applicant was employed as a Level 4 - Legal, Clerical and Administrative employee, Schedule B to the Legal Services Award 2010 (“the Award”).

   (2)The respondent contravened s.45 of the Fair Work Act 2009 (“the Act”) by failing to

   (a)pay the applicant his wages pursuant to clause 14 of the Award;

   (b)make superannuation contributions in accordance with the clause 23 of the Award;

   (c)pay the applicant annual leave loading on his accrued annual leave in accordance with clause 35.3 of the Award.

   (3)The respondent contravened s.90 of the Act by failing to pay the applicant his entitlement to accrued annual leave on termination of his employment.

   (4)The respondent contravened s.536(1) of the Act by failing to provide the applicant with payslips in accordance with that section within the prescribed period.

   (5)The respondent contravened s.535 of the Act by failing to make, keep and maintain employee records in relation to the applicant during his period of employment with the respondent.

3. The substantive proceedings related to the employment by Mr Saul Finberg (“the Applicant”) by Efron & Associates of which Mr Graeme Efron (“the Respondent”) is the Principal, for the period 5 March 2013 to 7 February 2014. 

4. In the substantive proceedings, the Applicant claimed he was employed under classification Level 5 – Legal, Clerical and Administrative Employee, Schedule B to the Award. The Respondent initially claimed that the Applicant was not an employee, but rather a person engaged in work experience. When the taking of evidence was completed, and on the day submissions were to be heard, the Respondent conceded the Applicant was an employee employed under the Award. The Respondent argued that the Applicant was employed at either Level 2 or Level 3 – Legal, Clerical and Administrative Employee, Schedule B to the Award.

5. The circumstances under which the Applicant was employed by the Respondent is set out in the substantive decision as follows at [15]:[2]

   “ The applicant approached the respondent with a view to gaining an opportunity to gain experience in a law firm.[3] The respondent states that he was prepared to provide this experience to the applicant. Although not expressly said, it is apparent that neither the applicant nor the respondent expected that the applicant’s employment would be ongoing. I am satisfied that the intention of both parties was that the employment with Efron and Associates would provide the applicant with useful experience in a law firm whilst he completed his Law Degree. At the time the applicant commenced his employment with the respondent he was enrolled in his final years of study for a Bachelor of Laws and Bachelor of Arts.”

   [2] Ibid at [15].

   [3] Affidavit of Saul Finberg filed 14 May 2014 at [2].

Legislation

1. The Court has a discretion as to whether to impose penalties for the contraventions and as to the level of those penalties: ss.545 and 546 of the Act.

2. Section 539(2) of the Act prescribes the following maximum penalties that may be imposed on an individual for contraventions of that Act:

   · 60 penalty units for a contravention of ss.44 and 45 of the Act; and

   · 30 penalty units for a contravention of ss.535 or 536 of the Act.

   ·    A penalty unit is $170.00 (s.4AA(1) of the Crimes Act 1914).

3. The maximum penalties that can be imposed by the Court here are:

   ·$10,200.00 for the contraventions of s.45 of the Act for non-payment of wages, superannuation and annual leave loading on accrued annual leave on termination of employment in accordance with the Award;

   ·$10,200.00 for the contraventions of s.45 of the Act for non-payment of accrued annual leave on termination of employment; and

   ·$5,100.00 for contraventions of s.535 or 536 of the Act (failure to keep records and payslips).

4. Multiple breaches of specified provisions may be treated as a single contravention if the contraventions are committed by the same person, and if they arose out of a course of conduct by the person: s.557(1) of the Act. Section 557 of the Act applies to contraventions of ss.44, 45, 535 and 536 of the Act: s.557(2) of the Act.

Approach to determining penalty

1. In Fair Work Ombudsman v Roselands Fruit Market Pty Ltd & Anor [2010] FMCA 599, Driver FM summarised the approach the Court should follow in these sorts of proceedings, which I respectfully adopt, at [22] to [26] as follows:

   “22. The first step for the court is to identify the separate contraventions involved. Each breach of each separate obligation found in the AFPCS, the NAPSA is a separate contravention of a term of an applicable provision for the purposes of s.719. -

   23. However, s.719(2) provides for treating multiple breaches, involved in a course of conduct, as a single breach.

   24. Secondly, to the extent that two or more contraventions have common elements, this should be taken into account in considering what is an appropriate penalty 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 what the respondent did. 
   This task is distinct from and in addition to the final application of the “totality principle”.

   25. Thirdly, the court will then consider an appropriate penalty to impose in respect of each course of conduct, having regard to all of the circumstances of the case.

   26. Fourthly and finally, having fixed an appropriate penalty for each group of contraventions or course of conduct, the court should take a final look at the aggregate penalty, to determine whether it is an appropriate response to the conduct which led to the breaches. 
   The court should apply an “instinctive synthesis” in making this assessment. This is what is known as an application of the “totality principle”.”

   (footnotes omitted)

2. Each of the breaches were multiple breaches, having persisted over the course of the Applicant’s employment. They will be treated as one breach.

3. The contraventions were identified in the declaration of this Court made on 11 September 2015. There are, therefore, six in total. I do not accept the Respondent’s submission (see below) that the underpayment of wages, the failure to pay superannuation and the failure to pay the Applicant loading on his accrued annual leave on termination of this employment (all contraventions of s.45 of the Act) constitute contraventions arising out of a “course of conduct” by that person. However, the contraventions relating to annual leave; namely, non-payment of annual leave on termination of employment (contravention of s.90 of the Act) and non-payment of loading on accrued annual leave on termination of employment (contravention of clause 35.3 of the Award) have common elements. The common element being the failure to pay the Applicant his entitlement to accrued annual leave on the termination of his employment. Accordingly, I will take this into consideration in the determination of an appropriate penalty.

4. A convenient checklist of the factors that the Court might consider in determining penalty include the matters that were identified by Mowbray FM in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7, at [26]-[59] and adopted by Tracey J in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [14]. That list is as follows:

   ·   The nature and extent of the conduct which led to the breaches.

   ·   The circumstances in which that conduct took place.

   ·   The nature and extent of any loss or damage sustained as a result of the breaches.

   ·   Whether there had been similar previous conduct by the respondent.

   ·   Whether the breaches were properly distinct or arose out of the one course of conduct.

   ·   The size of the business enterprise involved.

   ·   Whether or not the breaches were deliberate.

   ·   Whether senior management was involved in the breaches.

   ·   Whether the party committing the breach had exhibited contrition.

   ·   Whether the party committing the breach had taken corrective action.

   ·   Whether the party committing the breach had cooperated with the enforcement authorities;

   ·   The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements and

   ·   The need for specific and general deterrence.

5. The Court must of course be mindful of the caution expressed by Buchanan J in Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; (2008) 246 ALR 35; [2008] FCAFC 8 at [91] as follows:

   “Check lists of this kind can be useful providing they do not become transformed into a rigid catalogue of matters for attention. At the end of the day the task of the Court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations. There is no suggestion in the present case that the learned magistrate made any relevant error in her identification of the matters which she should consider in fixing penalties.”

Submissions

Applicant’s Submissions

1. The Applicant relies on the summary of the approach of the Courts to the imposition of penalties, as set out by FM Lucev in Olsen v Sterling Crown Pty Ltd [2008] FMCA 1392, at [32] to [33]:

   “32.  The Federal Court has suggested, against a background of increased penalties in the WR Act, that the imposition of civil penalties in industrial law proceedings is no longer to be approached with a light hand: Finance Sector Union v Commonwealth Bank of Australia (2005) 224 ALR 467 at 487 per Merkel J; [2005] FCA 1847 at para 72 per Merkel J (“Commonwealth Bank”), and that it might be appropriate for penalties under the WR Act to rise appreciably: Commonwealth Bank of Australia & Anor v Finance Sector Union (2007) 157 FCR 329at 364 per Branson J; [2007] FCAFC 18at para 192 per Branson J (“Commonwealth Bank Appeal”). The more heavy handed approach applies particularly where breaches are serious, wilful and ongoing: Commonwealth Bank ALR at 487 per Merkel J; FCA at para 72 per Merkel J.

   33. The approach suggested by the Federal Court has been followed by this Court on a number of occasions: See Mason v Harrington Corporation Pty Ltd [2007] FMCA 7at para 22 per Mowbray FM (“Harrington Corporation”); Flattery v The Italian Eatery Trading As Zeffirelli’s Pizza Restaurant (2007) 163 IR 14at 21 per Mowbray FM; [2007] FMCA 9at para 16 per Mowbray FM; Jones v Hanssen Pty Ltd [2008] FMCA 291at paras 24-25 per Lucev FM (“Hanssen”) and subject to a proper consideration of relevant factors as to assessment of penalty, ought to be followed in this case.”

   (footnotes included in extract)

2. The Applicant submits that the observations of Merkel J in Finance Sector Union v Commonwealth Bank of Australia [2005] FCA 1847; (2005) 224 ALR 467, that the Courts now regard breaches of industrial law more seriously than in the past, have been endorsed by both the Federal Court or Court of the Federal Court: Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128, Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union [2008] FCAFC 170 (“Plancor”) per Branson and Lander JJ.

3. The Applicant submits in relation to factors relevant to the proceedings the following:

   (a)the nature and extent of the conduct which led to the contravention – there was a significant underpayment of salary and benefits through the Applicant’s employment. The Respondent did not provide payslips to the Applicant and failed to produce employment records despite repeated requests from the Applicant’s solicitors;

   (b)the circumstances of the conduct – the impugned conduct continued for 11 months in circumstances where the uncontested evidence was that the Respondent payroll records contained “all of the indicia of an employee, albeit one who was underpaid.” The Respondent’s response was to disclaim knowledge of the administrative practices of this, including alterations to the payroll records as to the characterisation of the Applicant;

   (c)the consequences of the contravening conduct – the Applicant has been significantly underpaid and in pursuing his rights as an employee;

   (d)specific deterrence – with respect to the likelihood of the Respondent being involved in a similar breach in the future, the Respondent’s evidence is that he has employed students previously in similar circumstances. There has been no acknowledgement of the wrongfulness of his conduct nor has he given evidence of any steps that he subsequently took to familiarise himself with the relevant administrative and financial practices and procedures of his law practice and to make sure that such conduct will not re-occur. In the circumstances, the Applicant submits the court is entitled to regard him as having acted defiantly after a point in time when he ought to have accepted his responsibility under the award: Plancor per Gray J at [37];

   (e)general deterrence – the Applicant claims that the Respondent is a well-known and reputable lawyer, that employment by legal practices of student is a common practice and that their rights as employees must be demonstrated. Further, it must be shown to the public at large that the same obligations and sanctions apply as they apply to other employers;

   (f)contrition - the Respondent has not expressed or demonstrated any contrition, either to the Court or the Applicant, and he has not acknowledged the wrongfulness of his conduct, even after his late confession that he had employed the Applicant;

   (g)other relevant circumstances – the Respondent maintained several untenable and unreasonable grounds of defence throughout the proceedings, which the Applicant asserts were manifestly indefensible. This conduct prolonged the proceedings unnecessarily and greatly increased legal costs that were incurred by the Applicant in pursuing his right to be paid as an employee: see Kavassilas v Migration Training Authority Pty Ltd(No 2) [2012] FMCA 208 (“Kavassilas”). Furthermore, the Respondent’s concession that the Applicant was an employee was not made until some seven months after the initial hearing at the resumption of the adjourned hearing. The Respondent’s conduct occurred in circumstances where the Respondent was an experienced and competent lawyer, and was represented by his own legal practice, thereby being less constrained by the costs of his defence than a usual litigant: Kavassilas.

4. The Applicant did not specify the actual penalties sought but submitted that the penalty should be imposed at the higher end of the scale and that a discount of no more than 20% of the total would be adequate. Following the filing and serving by the Respondent of his submissions, the Applicant made further submission arguing that 20% discount would be overgenerous. The Applicant seeks an order that penalties be paid to him.

Respondent’s submissions

1. The Respondent’s submissions as to the appropriate penalty were as follows:

   (a)circumstances in which the conduct took place – the evidence disclosed that the Applicant approached the Respondent with a view to gaining an opportunity to gain experience in a law firm, and the Respondent was prepared to provide this to the Applicant. Although not expressly said, it is apparent that neither the Applicant nor the Respondent expected that the Applicant’s employment would be ongoing. The Court was satisfied that the intention of both parties is that the employment of the Applicant with the Respondent would provide the Applicant with useful experience in a law firm whilst he completed his Law Degree;

   (b)similar previous conduct – there is no evidence nor any suggestion that the Respondent has previously been found by a Court to have engaged similar conduct;

   (c)whether the breaches were properly distinct or arose out of the one course conduct – the breaches arose out of one course conduct. Each of the contravention of s.45 of the Act, dealing with the Award, were committed by the same person and the course conduct by that person and consequently the three contraventions ought to be taken to constitute a single contravention;

   (d)size of the company – the Respondent is a sole trader trading as Efron and Associates. The Respondent employs six employees.

   (e)Deliberateness of the breaches – the breaches were not as a result of any deliberate conduct, they occurred by mistake or oversight. As noted, the intention of both parties was that the employment of the Applicant with the Respondent would provide the Applicant with useful experience in a law firm whilst he completed his Law Degree. There is no evidence that the Respondent was aware of the underpayment and disregarded them;

   (f)Respondent’s contrition and corrective action – throughout the proceedings, the Respondent has offered to resolve the dispute. The Applicant failed to accept the offers submitted;

   (g)specific deterrence – the need for specific deterrence is not a  significant consideration, as the Respondent is a first-time offender, has admitted liability and has been cooperative and does not have any prior contravention recorded against him from previous similar conduct;

   (h)general deterrence – in this case there is not a high need for general deterrence as there is no evidence before the Court that other law firms are following suit and the underpayment of law students is prevalent in the industry, such that a significant general deterrent element needs to be included.

1. The Respondent submits that in the circumstances, total penalties of not more than 25% of the total penalty would be appropriate. The Respondent submits that the following orders are appropriate in the circumstances:

   (1)the Respondent pay the Commonwealth the following penalties for breaches of the Act:

   (a)$2,550.00 the breach of s.45 of the Act;

   (b)$2,550.00 the breach of s.90 of the Act;

   (c)$2,550.00 for the breach of s.536(1) of the Act; and

   (d)$2,550.00 for the breach of s.535 of the Act.

   (2)An order pursuant to s.546(3) of the Act that all penalties imposed by the Court be paid to the Consolidated Revenue Fund of the Commonwealth within 28 days of the order;

   (3)No order as to costs.

Consideration

(a) – The nature and extent of the conduct which led to the breaches

1. For the total period of his employment (11 months), the Applicant was underpaid his wages, and his entitlement to superannuation contributions were not made in accordance with the Award. In addition, upon the termination of his employment, he was not paid his accrued annual leave under the Act’s minimum employment safety net standards or his entitlement to leave loading on this accrued leave. The Applicant submits that the underpayment in wages was around $28,000.00. There is a dispute between the parties regarding the precise amount owing, with the Respondent estimating that the underpayment of entitlements was $24,000.00. Either way the underpayment is significant.

2. On the other hand, the contravention concerns one employee. Whilst the Respondent gave evidence that he had provided law students in the past with what he described as work experience placement, there is no evidence on the numbers of students or payments made.

3. The Applicant was not given not given payslips until in or around June 2013, some three months after he commenced employment, and only following requests made by him for the provision of payslips.[4] In the substantive proceedings, I found that the Respondent had failed to make, keep and maintain employee records.[5]

   [4] Ibid at [53].

   [5] Ibid at [54].

(b) – The circumstances in which that conduct took place

1. The circumstances surrounding the Applicant’s employment were, in my view unique, setting the employment apart from the usual circumstances. I have earlier set out my findings regarding the circumstances under which the Applicant was employed by the Respondent (see [4] above), the key features of which were to provide the Applicant, a law student, with experience in a law firm and for a limited (although unspecified) period of time. This is not to say that he was not an employee, he was. Nor does it justify a failure to accord the Applicant his rightful entitlements.

2. However, the determination of the appropriate classification under the Award, given the unique circumstances, was not immediately apparent.  In my substantive decision I described the classification structure of the Award thus at [36]:

   “In context, it can be said that the classification structure of the Award contemplates, on the one hand, a clerical and administrative stream for employees employed by employers. In this stream progression is provided from Level 1 to Level 5. The structure also caters for Law graduates who are undertaking, what has hitherto been known as clerkship, but described in this Award as training for the purpose of admission into practice. The Law Graduate is classified as Level 5 but receives a higher rate of pay than Level 5 - Legal, Clerical and Administrative employee. The highest rate of pay under the Award paid to a classification is Level 6 – Law Clerk.”

3. In determining the classification under which the Applicant was employed I averted to the circumstances of his employment thus at [42]:

   “The applicant was employed neither as a clerical and administrative employee nor graduate law clerk. He was employed for the purpose of acquiring experience in a law firm. No doubt, this meant providing him with a range of tasks across the clerical and administrative stream together with experience in the firm’s legal work. The applicant had not yet acquired a tertiary qualification and there is no dispute that he engaged in his tasks generally under supervision from senior solicitors and clerical and administrative employees.”

4. In other words, putting the Law Graduate classification to one side, which could never apply to the Applicant, the ascertainment of the appropriate classification under which he should be paid would not, in my opinion, have been immediately apparent.

(c) – The nature and extent of any loss or damage sustained as a result of the breaches

1. I have dealt with this factor earlier. The Applicant was deprived of his entitlement to wages and superannuation contributions during his employment, and ongoing (given the parties have yet to resolve the actual amounts of underpayments), and as a result of the non-payment for accrued annual leave and leave loading, and has been deprived of that amount since his employment was terminated.

(d) – Whether there had been similar previous conduct by the defendant

1. I have earlier referred to the evidence of the Respondent regarding work experience placement students. The Respondent has not been found by a Court to have engaged in similar conduct.

(e) – Whether the breaches were properly distinct or arose out of the one course of conduct

1. The Court has found that the breaches fall into six groups.

(f) – The size of the business enterprise involved

1. The Respondent operates as a sole trader of Efron & Associates and employs 6 employees. The Respondent employs the equivalent of a pay roll clerk/bookkeeper and has no dedicated human resource function. However, the Respondent is a legal practitioner and the business is a law firm. One would expect the Respondent to have at least some knowledge of the concept of the legal obligations on employers towards their employees, or to have taken some steps to enquire about the status of the Applicant and his legal obligations to him.

2. In Workplace Ombudsman v Saya Cleaning Pty Ltd [2009] FMCA 38 at [26]-[27] Simpson FM (as he then was) decided:

   “26. The first respondent is a small company and, I infer, has very few if any assets. However as Justice Tracey said in Kelly v Fitzpatrick (above):

   “No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing an appropriate monetary sanction.  Such a sanction must be imposed at a meaningful level.”

   27. In Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at paras 27 to 29 it was said:

   “Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to a Court’s consideration of penalty.” ”

3. In Hansen v Mt Martha Community Learning Centre Inc (No 2) [2015] FCA 1283 at [5], Jessup J held that whilst the size and financial circumstances of the Respondent employer does not exculpate conduct by employers contravening the Act, it is a relevant consideration in determining the appropriate penalty.

4. The Court accepts that the size of the business or the financial circumstances provide no excuse for non-compliance.

(g) – Whether or not the breaches were deliberate

1. I am not satisfied that the breaches were deliberate. Having heard the evidence given by the Respondent, I am satisfied that he genuinely believed, erroneously, that the arrangement he had reached with the Applicant was one of work experience. He was convinced he was providing the Applicant appropriate experience in a law firm and providing him with some remuneration, in recognition that the Applicant would provide valuable services.

2. I agree that there were indicia that the Applicant was an employee; such as pay slips and charging some clients for the time of the Applicant. However, in my view the Respondent simply did not turn his mind to these, given his conviction about the arrangement he had reached with the Applicant.

(h) – Whether senior management was involved in the breaches

1. The Respondent is the Principal of Efron & Associates. His evidence that he had no knowledge of the administrative practices of the firm may be true, but does not excuse the contraventions. The evidence is that he reached the arrangement with the Applicant, including his wages.

(i) – Whether the party committing the breach had exhibited contrition;

(j) – Whether the party committing the breach had taken corrective action; and

(k) – Whether the party committing the breach had cooperated with the enforcement authorities;

1. Where wrong-doers have co-operated and have also made admissions early in the course of an investigation, or soon after the commencement of proceedings, it is appropriate to allow a discount of penalty (in the vicinity of up to 25-30%). However, consistent with the decision in Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70 (at 76 per Stone and Buchanan JJ):

   “… 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 credible expression of regret; and/or (b) has indicated a willingness to facilitate the course of justice.

2. In Fair Work Ombudsman v Contracting Plus Pty Ltd & Anor [2011] FMCA 191 Burnett FM (as he then was), said at 125-127:

   “125. Although the applicant concedes that the respondents have admitted liability and could be said to have cooperated by partaking in the investigation, at least in a limited fashion; particularly by engaging in the record of interview process; by providing some necessary records and, by signing the agreed statement of facts, although that itself was only agreed on the day of the trial and, of course, only after some delay, the applicant says that the court should not be too anxious to afford the respondent a significant discount for its admission and conduct.

   126. In considering whether or not a discount should be applied, I have regard to the observations of Branston J in Mornington Inn Pty Ltd v Jordan, where her Honour said:

   “The rationale for providing a discount for early plea of guilty in a criminal case does not apply neatly to a case such as the present, where a civil penalty is sought and the case proceeds on pleadings. Nevertheless, in our view, it should be accepted, for the same reasons as given in Cameron, that a discount should not be available 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 fairly be said an admission of liability (a) has indicated an acceptance of wrongdoing and suitable and credible expression of regret and/or (b) has indicated a willingness to facilitate the course of justice.”

   127. In my view, this is a case where neither of those qualities can be demonstrated and, accordingly, I do not consider that any discount ought to be provided in this instance on this basis.

   (footnotes omitted)

3. The Respondent submits that his concession that the Applicant was an employee at the adjourned hearing date, and offers made to settle the dispute, are evidence of his contrition. In my view, these do not amount to contrition in the relevant sense, as they occurred very late in the proceedings.

4. The Respondent did not provide any evidence of corrective evidence he had taken with respect to earlier law students working at the firm. Although I accept the evidence was very limited about the numbers and/or arrangements for these students. Since the employment of law students is an entirely voluntary action by the Respondent and something which does not appear to be necessary for the operation of the business, it seems to me unnecessary for the Respondent to have provided evidence about some future corrective action.

(l) – The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements

1. A fundamental object of the Act is to provide a guaranteed safety net of minimum terms and conditions for employees. Significant penalties are prescribed for non-compliance. Central to the ability to investigate and enforce, are the requirements to provide payslips and keep records. This was specifically acknowledged in Fair Work Ombudsman v Orwill Pty Ltd & Ors [2011] FMCA 730 at [21]:

   “… The statutory purpose of the WR Regulations ties in with the purposes for which the powers of workplace inspectors can be exercised under s 169 of the WR Act, those purposes including determination of whether various industrial instruments and minimum standards and entitlements, and the requirements of the WR Act and WR Regulations themselves, are being observed. Manifestly, failure to make and maintain records in relation to employee entitlements, undermines the utility and effectiveness of workplace inspectors, and their ability to determine whether or not there has been compliance with minimum standards and industrial instruments, and the provision of effective means for investigation and enforcement of employee entitlements…”

   (footnotes omitted)

2. In Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557, Marshall J observed at [29]:

   “… It is important to ensure that the protections provided by the Act to employees are real and effective and properly enforced. The need for general deterrence cannot be understated. Rights are a mere shell unless they are respected…”

(m) – The need for specific and general deterrence

1. In relation to specific deterrence, Gray J observed in Plancor at [37] that:

   “… Specific deterrence focuses on the party on whom the penalty is to be imposed and the likelihood of that party being involved in a similar breach in the future. Much will depend on the attitude expressed by that party as to things like remorse and steps taken to ensure that no future breach will occur…”

2. In relation to general deterrence, Lander J noted in Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; (2007) 162 IR 444; [2007] FCAFC 65 (“Ponzio”) at [93]:

   “… In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend: Yardley v Betts (1979) 22 SASR 108. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations.  If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section.  However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat.  In some cases, general deterrence will be the paramount factor in fixing the penalty: R v Thompson (1975) 11 SASR 217.”

3. Similarly, in Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228; [2001] FCA 1364 at [9] Finkelstein J said:

   “… even if there be no need for specific deterrence, there will be occasions when general deterrence must take priority, and in that case a penalty should be imposed to mark the law's disapproval of the conduct in question, and to act as a warning to others not to engage in similar conduct …”

4. I am not satisfied that there is a considerable need for specific deterrence in this case. Although the Respondent has shown little remorse or contrition, there is no evidence before the Court to suggest that he presently has law students working with the firm, or indeed would enter into such an arrangement in the future.  

5. I am also not satisfied that there is a considerable need in this case for general deterrence. The Applicant asserts that the employment of law students by law firms is common in the legal industry, however, no evidence was produced to support this assertion. Nor is there evidence, or could I take judicial notice of, an allegation that law students are employed and underpaid by law firms in the industry.

6. The Court accepts that the most fundamental purpose of a civil penalty is to ensure compliance with the law. The object of a penalty is 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”: see Re Trade Practices Commission v CSR Limited [1990] FCA 521; (1991) 13 ATPR 41-076 at [40].

7. There are no other relevant matters which in my opinion require consideration in this matter.

Conclusion

1. Having regard to all the circumstances, I am satisfied that the appropriate penalty is one which falls near the mid-range of the maximum penalty for each breach. As noted earlier, I am also satisfied that in setting the penalty for the contravention of the Act, and breach of the Award in relation to Annual Leave, I should take into account that both have a common underlying element.

2. Consequently, I will fix the following penalties for each of the contraventions:

   (a)$5,000.00 for the underpayment of wages;

   (b)$5,000.00 for the underpayment of superannuation contributions;

   (c)$2,500.00 for the failure to pay annual leave loading;

   (d)$5,000.00 for the failure to pay accrued annual leave;

   (e)$2,300.00 for the failure to provide the Applicant’s payslips; and

   (f)$2,300.00 for the failure to keep and maintain employee records in relation to the Applicant.

Totality Principle

1. The proper approach in determining penalty is to impose a penalty for each contravention, and then, as a check, to consider whether the aggregate penalty is appropriate for all of the contraventions as a whole.  In Ponzio, Jessup J, with whom Lander J agreed, said at [145] to [146]:

   “145.    For the above reasons, his Honour’s disposition of the appellant’s case under s 187AA cannot stand. That does not mean, however, that the appeal must necessarily succeed. As I have said, the trial Judge recognised that this was a case in which the totality principle should apply. His Honour said that the principle required “that in imposing penalties for numerous offences, the penalties in aggregate are just and appropriate ... “For that proposition, his Honour relied upon CPSU v Telstra Corporation Ltd (2001) 108 IR 228, 230 [7]. In CPSU, Finkelstein J said that, in a case of multiple breaches punishable by pecuniary penalty, it would be –

   ... necessary to resolve upon the appropriate total penalty, dividing that penalty by the number of individual contraventions and record that amount as the penalty for each contravention, whether or not the sum produced might be regarded as an inappropriate individual penalty.

   With respect to his Honour, I do not believe this is the correct approach. The position was, in my view, correctly stated by Goldberg J in ACCC v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 at 53:

   The totality principle is designed to ensure that overall an appropriate sentence or penalty is appropriate and that the sum of the penalties imposed for several contraventions does not result in the total of the penalties exceeding what is proper having regard to the totality of the contravening conduct involved: McDonald v R (1994) 48 FCR 555; 120 ALR 629. But that does not mean that a court should commence by determining an overall penalty and then dividing it among the various contraventions. Rather the totality principle involves a final overall consideration of the sum of the penalties determined. In Mill v R (1988) 166 CLR 59; 83 ALR 1 the High Court accepted the following statement as correctly describing the totality principle:

   The effect of the totality principle is to require a sentencer who has passed a series of sentences, each properly calculated in relation to the offence for which it is imposed and each properly made consecutive in accordance with the principles governing consecutive sentences, to review the aggregate sentence and consider whether the aggregate is “just and appropriate”. The principle has been stated many times in various forms: “when a number of offences are being dealt with and specific punishments in respect of them are being totted up to make a total, it is always necessary for the court to take a last look at the total just to see whether it looks wrong;” “when ... cases of multiplicity of offences come before the court, the court must not content itself by doing the arithmetic and passing the sentence which the arithmetic produces. It must look at the totality of the criminal behaviour and ask itself what is the appropriate sentence for all the offences.”

   As Spender J pointed out in McDonald v R at FCR 556; ALR 631:

   “Implicit in that statement is that the sentence for each offence should be "properly calculated in relation to the offence for which it is imposed.”

   It is explicit in this statement that a sentencer or penalty fixer must, as an initial step, impose a penalty appropriate for each contravention and then as a check, at the end of the process, consider whether the aggregate is appropriate for the total contravening conduct involved: McDonald v R at FCR 563, per Burchett and Higgins JJ.

   The position as stated in Mill, on which Goldberg J relied, was described by Gummow, Callinan and Heydon JJ as the “orthodox, but not necessarily immutable, practice” in Johnson v The Queen [2004] HCA 15; [2004] 205 ALR 346, [26].

   146.  In a setting which did not involve an agreement on penalty, it would, therefore, be necessary to commence with an assessment of an appropriate penalty for each contravention, paying due regard to such mitigating factors as there were. In the judgments to which the trial Judge referred, it seems to have been accepted that, absent strong mitigating circumstances such as sheer inadvertence, a penalty of about $200 for each contravention of s 187AA on the facts existing on 5 and 6 August 2003 could not be regarded as excessive. On the facts of the present case, and having regard to what I have described as the conventional mitigating circumstances referred to by his Honour, I do not think that a penalty of $200 for a single contravention would have been excessive. It may not have been the penalty that I would have imposed, but on no view might it have been regarded as outside the permissible range. If that penalty had been imposed for each of the contraventions which came before his Honour, a total of $20,200 would be the aggregate result. Manifestly the application of the totality principle was then required.”

1. I do not consider that the totality principle requires some reduction of the amount that would otherwise be the aggregate penalty ($22,100.00) in this case. I consider that, in view of the totality of the Respondent’s conduct, the aggregate of the penalty is appropriate. Consequently, the Respondent will be ordered to pay a total penalty $22,100.00.

2. The Applicant has also sought that payment of any pecuniary penalty ordered, to be paid to the Applicant by the Respondent. Section 546(3) of the Act allows the Court to order that a penalty or part of a penalty, be paid to the Commonwealth, a particular organisation, or a particular person.

3. In considering this matter I have had the opportunity of being guided by the decision of Tracey, Barker and Katzmann JJ in Sayed v Construction, Forestry, Mining and Energy Union [2016] FCAFC 4. In particular, I refer to and rely upon the following paragraphs:

   “120. To the extent that the primary judge appears to have drawn a distinction, at [88]-[89], between a case prosecuted by a union or other representative organisation and one prosecuted by the person directly affected by the contravention(s), we fail to see how that distinction, of itself, should lead to any immediate assumption or conclusion that the individual, by contrast to an organisation, has not, or has not necessarily, incurred significant time, trouble and lost opportunity costs in maintaining the prosecution, so that in the absence of some disentitling feature, the usual order for payment of the penalty to the prosecutor is appropriate.

   121. Furthermore, it is not apparent to us why the receipt of a penalty should not operate as an incentive to an affected person to bring a prosecution like this under the FW Act. After all, as Wilcox J noted in Finance Sector Union, it ensures the enforcement of the legislative scheme. Moreover, as Jessup J put it in Murrihy, this incentive to bring and maintain such a proceeding makes it more likely that the applicable provisions of the FW Act “will be more than mere words on the statute book”. As Gray J said in Plancor, the question of “profit” does not arise on a proper construction of the power.”

4. I am satisfied that the penalties should be paid to the Applicant.

Conclusion

1. For the reasons set out in this judgment, I shall order that the Respondent pay the Applicant an aggregate penalty of $22,100.00.

I certify that the preceding fifty-seven (57) paragraphs are a true copy of the reasons for judgment of Judge Jones

Date: 17 May 2016