FWO v China Sanan Engineering Construction Corp
[2013] FCCA 1177
•29 August 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FWO v CHINA SANAN ENGINEERING CONSTRUCTION CORP | [2013] FCCA 1177 |
| Catchwords: INDUSTRIAL LAW – Contraventions – respondent company incorporated in People’s Republic of China – respondent sends 24 employees to South Australia to dismantle machinery to be returned to China – employees obtain 457 visas – respondent fails to pay their employees as required by Fair Work Act – respondent admits contraventions – respondent pays workers their full entitlements in accordance with the Act – statement of agreed facts – penalty imposed – factors to consider. |
| Legislation: Crimes Act 1914 (Cth), s.4AA |
| Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 Kelly v Fitzpatrick (2007) 166 IR 14 Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550 Fair Work Ombudsman v Turbo Café Watergardens Pty Ltd & Anor [2012] FMCA 794 Ponzio v B & P Caelli Constructions Pty Ltd & Others (2007) 158 FCR 543 LHMU v Broadlex Cleaning Australia Pty Ltd [1997] IRCA 296 Victoria University of Technology v AEU [1999] FCA 1065 Saxena v PPF Asset Management Ltd [2011] FCA 395 Construction, Forestry, Mining and Energy Union and Others v Clark (2008) 170 FCR 574 Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70 Fair Work Ombudsman v W.K.O. Pty Ltd [2012] FCA 1129 |
| Applicant: | FAIR WORK OMBUDSMAN |
| Respondent: | CHINA SANAN ENGINEERING CONSTRUCTION CORP |
| File Number: | ADG 151 of 2010 |
| Judgment of: | Judge Simpson |
| Hearing date: | 12 November 2012 |
| Date of Last Submission: | 12 November 2012 |
| Delivered at: | Adelaide |
| Delivered on: | 29 August 2013 |
REPRESENTATION
| Counsel for the Applicant: | Mr G Edmonds-Wilson |
| Solicitors for the Applicant: | Office of Fair Work Ombudsman |
| Counsel for the Respondent: | Mr L Smith |
| Solicitors for the Respondent: | Norman Waterhouse |
ORDERS
It is declared that the respondent contravened s.293 of the Fair Work Act 2009 (Cth) in that the respondent failed to pay its employees monies payable to them in relation to their work in Australia in full and at least monthly.
The respondent shall within 28 days pay a pecuniary penalty pursuant to s.546(1) of the Fair Work Act in the amount of $14,850 for contravention of s.323(1) of the Fair Work Act 2009, which sum shall be paid to the Consolidated Revenue Fund of the Commonwealth of Australia.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 151 of 2010
| FAIR WORK OMBUDSMAN |
Applicant
And
| CHINA SANAN ENGINEERING CONSTRUCTION CORP |
Respondent
REASONS FOR JUDGMENT
The respondent is, and was at all material times, a corporate body validly incorporated in accordance with the laws of the People’s Republic of China. In October 2009 the respondent sent 24 of its employees to South Australia to carry out work on a project at the Mitsubishi Motors Australia Ltd abandoned site at Clovelly Park in South Australia. The 24 workers were granted visas by the Department of Immigration and Citizenship. They continued working on the project until 4 March 2010 when the respondent returned them to China.
These proceedings concern the fact that while these 24 workers were working in South Australia, the respondent failed to comply with s.323(1) of the Fair Work Act 2009 (Cth). The respondent failed to pay the workers on time, as required by subsection (c) or in full as required by subsection (a). Instead the respondent paid the workers in the way that the workers would have been paid if they had been working in China.
The parties put before the Court a Statement of Agreed Facts in the following terms:
“INTRODUCTION
1.On 18 June 2010 the Applicant filed an Application (Originating Application) and Statement of Claim (SOC) in this Court in respect of the Respondent in which the Applicant alleged that the Respondent underpaid the 24 former employees listed in Attachment A to the SOC (Employees).
2.On 9 July 2010 the Applicant filed an Application in a Case and supporting Affidavit in this Court in which the Applicant sought leave pursuant to Order 8 Rule 3(2) of the Federal Court Rules to serve the Originating Application and SOC on the Respondent in the People’s Republic of China by using the diplomatic channel in accordance with Order 8 Rule 9 of the Federal Court Rules.
3.On 12 July 2010 the Court granted the Applicant leave to serve the Originating Application and SOC on the Respondent in the People’s Republic of China by using the diplomatic channel.
4.On or about 25 March 2011 the Respondent was served with the Originating Application and SOC.
5.On 13 May 2011 the Respondent filed and served a Defence (Defence) in respect of the SOC in which the Respondent admitted to the technical breaches alleged by the Applicant while denying that any underpayment had occurred by reason of the Employees receiving their Chinese wage and an overseas wage allowance (Wage Allowance).
6.On 30 November 2011, the Respondent filed and served an Application in a Case (Dismissal Application) seeking to have the Originating Application and certain paragraphs of the SOC dismissed.
7.Also on 30 November 2011, the Applicant filed and served an Application in a Case seeking leave to amend the SOC.
8.On 3 February 2012, pursuant to leave granted by the Court on 31 January 2012, the Applicant filed and served an amended Statement of Claim (Amended SOC). The Applicant alleged contraventions of:
(a)section 293 of the FW Act;
(b)Item 5 of Schedule 16 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009; and
(c)subsection 323(1) of the FW Act.
9.On 29 February 2012, the Respondent filed and served an amended Defence to the Amended SOC (Amended Defence). In the Amended Defence, the Respondent admitted the contraventions of subsection 323(1) of the FW Act (the Respondent’s Admissions) but otherwise denied the alleged contraventions.
10.On 24 August 2012:
(a)the Applicant filed and served a Notice of Discontinuance in respect of the relief sought by way of Orders 1 and 2 of the Amended SOC (which related to the alleged contraventions referred to in paragraphs 8(a) and 8(b) above); and
(b)the Respondent filed and served a Notice of Discontinuance in respect of the Dismissal Application.
11.The Parties agree that by reason of the Applicant’s Notice of Discontinuance and the Respondent’s Admissions, there is no remaining or outstanding dispute between the parties in relation to liability or as to the relief which should be granted in these proceedings.
12.In these proceedings the Applicant is seeking and the Respondent does not oppose:
(a)orders pursuant to section 546(1) of the Fair Work Act 2009 (Cth) (FW Act) imposing a pecuniary penalty on the Respondent as a result of the Respondent’s admitted contraventions of subsection 323(1) of the FW Act (being the relief sought by way of Orders 2A of the Amended SOC);
(b)an order pursuant to section 546(3)(a) of the FW Act, that any pecuniary penalty imposed on the Respondent under the FW Act be paid to the Commonwealth (being the relief sought by way of Order 2 of the Amended SOC); and
(c)no order as to costs in the proceedings.
THE RESPONDENT
13.The Respondent:
(a)was at all material times between 29 October 2009 and 4 March 2010 (the Relevant Period), the employer of the Employees;
(b)prior to 29 October 2009, had not previously had any dealings in Australia.
THE PROJECT
14.In 2009, Mitsubishi Motors Australia Ltd (MMAL) sold a substantial amount of heavy machinery used in the production of car-bodies to a German based company, which on-sold the machinery to the Beijing Automotive Industry Holding Co Ltd (BAIC).
15.The Respondent is a second hand equipment and machinery removal company. It was engaged by BAIC to disassemble and pack the machinery for shipment from Adelaide to China (Project).
16.In or around October 2009, the Department of Immigration and Citizenship (DIAC) granted the Employees subclass 456 visas to allow them to enter Australia and complete the Project.
17.DIAC subsequently cancelled the subclass 456 visas in stages in February and March 2010.
18.The Respondent applied for subclass 457 visas instead and all 19 visas applied for were granted on 16 March 2010.
THE EMPLOYEES
19.At all material times during the Relevant Period, the Employees and each of them:
(a)were aged 21 years of age or older;
(b)were not employees with disabilities;
(c)were not employees to whom training arrangement applied;
(d)performed work for the Respondent at a plant formerly operated by Mitsubishi Motors Australia located at 1284 South Road, Clovelly Park, in the State of South Australia (MMAL Site);
(e)worked full-time hours of work approximately 7.6 hours per day at the MMAL Site;
(f)worked approximately 21.75 days per month at the MMAL Site; and
(g)were paid by the Respondent for the work they performed at the MMAL Site in Chinese Yuan (CNY) and were paid and received payment in CNY in China.
THE ENTITLEMENTS
20.At all material times between:
(a)29 October 2009 to 31 December 2009 (inclusive), the Respondent was obliged to pay to the Employees and each of them a rate of pay at least equal to the transitional standard Federal Minimum Wage (FMW); and
(b)1 January 2010 and 4 March 2010 (inclusive), the Respondent was obliged to pay to the Employees and each of them a rate of pay at least equal to the national minimum wage contained in the transitional national minimum wage order (National Minimum Wage).
21.At all material times between:
(a)29 October 2009 and 31 December 2009 (inclusive), the FMW was $14.31 per hour; and
(b)1 January 2010 and 4 March 2010 (inclusive), the National Minimum Wage was $14.31 per hour.
22.At all material times during the Relevant Period, the Respondent was obliged by section 323 of the FW Act to pay the Employees and each of them the amounts payable to them in relation to the work they performed at the MMAL site:
(a)in full;
(b)in money by:
(i)cash;
(ii)cheque, money order, postal order or similar order, payable to the employee; and/or
(iii)the use of an electronic funds transfer system to credit an account held by the employee; and
(c)at least monthly
PAYMENTS MADE TO THE EMPLOYEES
23.At all material times during the Relevant Period the Employees, and each of them, were paid by the Respondent for the work they performed at the MMAL Site a basic salary of between CNY2005 and CNY6603 per month, paid on a monthly basis (Basic Salary).
24.By reason of the hours worked by the Employees at the MMAL Site, the Employees’ Basic Salary was between approximately AUS$1.90 per hour and approximately AUS$6.75 per hour.
25.In addition to the Basic Salary, each Employee was entitled to receive from the Respondent for the duration of their presence in Australia for the purposes of undertaking work at the MMAL Site an overseas travel payment of US$98 per day, minus a deduction of AUS$20 per day on account of food and incidental items supplied to the Employees at the Respondent’s cost (Supplementary Entitlement).
26.Pursuant to the Supplementary Entitlement, and having regard to the relevant exchange rate, each Employee was paid by the Respondent approximately AUD$88.90 per day, or approximately AUS$622 per week, for the duration of their presence in Australia for the purposes of undertaking work at the MMAL Site (Overseas Travel Payments).
27.The Overseas Travel Payments have been variously characterised by the Respondent as an “allowance” and a “subsidy wage”, but the Respondent contends and, for the purpose of these Proceedings, the Applicant agrees that the Overseas Travel Payments constituted payments made towards satisfying the Respondent’s obligation to pay the FMW and/or the National Minimum Wage.
28.The Overseas Travel Payments:
(a)were paid by the Respondent to each Employee, by means of a $400 per month payment during each Employee’s period of employment in Australia and payment of the balance as a lump sum in CNY upon each Employee’s return to China at the conclusion of the Employee’s period of employment in Australia; and
(b)by reason of the hours worked by the Employees at the MMAL site, amounted in total to an additional payment to each Employee (on top of the Basic Salary) of $16.37 per hour worked at the MMAL Site.
FWO INVESTIGATION
29.On 27 January 2010, seven Fair Work Inspectors attended the MMAL Site. During that site visit:
(a)Fair Work Inspectors Brodie Smith and Monica Toonen met with Mr Zhang Jinyuan (Chief Engineer and Vice Project Manager of the Respondent) and Mr Zhang Zhi Yang (Manager of Beijing Automobile Industry Corporation (BAIC)). In the course of that meeting, Fair Work Inspector Toonen explained that the purpose of the Fair Work Ombudsman’s (FWO’s) site visit was to ensure that any workers working in Australia were being paid in accordance with Australia laws.
(b)Fair Work Inspector Toonen served the Respondent with a Notice to Produce Records or Documents (NTP), requiring the production of:
(i)employment records for employees employed by the Respondent and working in Australia during the period 1 December 2009 to 27 January 2010;
(ii)incorporation records for the Respondent; and
(iii)contracts with respect to work performed by the Respondent’s employees during the period 1 December 2009 to 27 January 2010,
by 3.00 p.m. on 11 February 2010.
30.On 28 January 2010, four Fair Work Inspectors attended the MMAL Site. During that site visit, Fair Work Inspectors Brenda Rolls, Peter Allen and Smith interviewed five of the Employees with the purpose of determining compliance with the WR Act and the FW Act.
31.On 2 February 2010, Fair Work Inspectors Rolls and Smith attended the Employees’ place of accommodation in Mylor and interviewed two of the Employees with the purpose of determining compliance with the WR Act and the FW Act.
32.On 10 February 2010, Fair Work Inspectors Carey Trundle and Toonen attended the MMAL Site and met with Mr Zhang of the Respondent. During this meeting:
(a)Mr Zhang advised that the Respondent was adhering to Chinese workplace laws and that he was paid monthly by the Respondent in China;
(b)Mr Zhang was handed a letter requesting his attendance at a Record of Interview (ROI) on 15 February 2010; and
(c)Mr Zhang was also handed a letter requesting Mr Zhang of BAIC’s attendance at a ROI on 15 February 2010, which Mr Zhang was asked to provide to Mr Zhang of BAIC.
33.On 11 February 2010:
(a)Jessica Yang of the Respondent sent Fair Work Inspector Toonen an email attaching a letter and various documents in response to the NTP served on 27 January 2010, including:
(i) a letter from the Respondent to Fair Work Inspector Toonen; and
(ii) a list of employee details.
(b)Fair Work Inspector Toonen sent Ms Yan an email requesting further documentation relating to the Respondent’s employee pay list and documentation relating to the position, duty and job description of each employee.
(c)Ms Yang sent Fair Work Inspector Toonen an email advising that the relevant personnel able to provide the further documentation were on leave due to the Chinese Spring Festival Holiday and requested that Fair Work Inspector Toonen contact the Respondent again after the holiday.
34.On 12 February 2010:
(a)Fair Work Inspectors Trundle and Smith conducted a record of conversation with Ms Yang of the Respondent by telephone. During this conversation:
(i) Fair Work Inspector Trundle advised Ms Yang that the documents provided on 11 February 2010 were insufficient; and
(ii) Ms Yang advised that the pay list requested by Fair Work Inspector Toonen on 11 February 2010 could be provided by Mrs Wang, the Respondent’s Human Resources Manager, who would not be returning to the office until the end of February 2010 due to Chinese public holidays.
(b)Mr Zhang of the Respondent sent Fair Work Inspector Toonen an email advising that 15 February 2010 is the Chinese New Year holiday and it was therefore not convenient for the Respondent to attend the requested ROI on that date.
35.On 16 February 2010:
(a)Fair Work Inspector Trundle had a telephone conversation with Maria Ho of Norman Waterhouse Lawyers (NWL). During that conversation, Ms Ho stated that she was not aware of the NTP that had been served on the Respondent on 27 January 2010 and requested that a copy be faxed to her.
(b)Fair Work Inspector Toonen faxed Ms Ho a copy of the NTP served on the Respondent on 27 January 2010.
36.On 17 February 2010, Fair Work Inspectors Toonen and Peters attended the MMAL Site and met with Mr Zhang of the Respondent. During that meeting:
(a)Mr Zhang was handed a letter requesting his attendance at a ROI on 24 February 2010;
(b)Mr Zhang was also handed a letter requesting Mr Zhang of BAIC’s attendance at a ROI on 24 February 2010, which Mr Zhang was asked to provide to Mr Zhang of BAIC.
(c)Mr Zhang was handed a Failure to Comply letter with respect to the Respondent’s failure to comply with the NTP served on the Respondent on 27 January 2010. In that letter, the Respondent was asked to provide a reasonable excuse for not complying with the NTP by 26 February 2010;
(d)the Respondent was served with a further NTP, requiring the production of:
(i) employment records for employees employed by the Respondent and working in Australia during the period 1 December 2009 to 17 February 2010;
(ii) incorporation records for the Respondent; and
(iii) contracts with respect to work performed by the Respondent’s employees,
by 3.00 p.m. on 5 March 2010;
(e)Mr Zhang advised that the Respondent’s Human Resources Manager was on leave so the Respondent may not be in a position to provide the documents required by the NTP just served.
37.On 19 February 2010, Ms Ho of NWL advised Michael Young of DIAC that as the Respondent was now applying for subclass 457 visas, they will do their best to comply with the deadline of 5 March 2010 for the NTP served on 17 February 2010, but may not be able to due to the volume of paperwork involved.
38.On 23 February 2010, Mr Zhang of the Respondent sent Fair Work Inspector Toonen an email advising that the NTP served on 17 February 2010 had been sent to China and that due to being busy at work it was not convenient for the Respondent to attend the requested ROI on 24 February 2010.
39.On 24 February 2010, Fair Work Inspector Toonen had a telephone conversation with Ms Ho of NWL. During that conversation, Ms Ho advised that she would respond in writing to the Failure to Comply letter by 5 March 2010. Ms Ho advised that Ms Tam of NWL would be responding to the NTP served on 17 February 2010 by 5 March 2010.
40.On 25 February 2010, Ms Ho of NWL sent Fair Work Inspector Toonen a letter in response to the Failure to Comply letter dated 17 February 2010. In that letter Ms Ho explained that the Respondent misunderstood the requirement to comply with the NTP (the Respondent thought it was voluntary) and, additionally, that it was difficult for the Respondent to comply due to the Chinese New Year public holidays. Ms Ho advised that the Respondent had taken steps to comply with the NTP served on 17 February 2010.
41.On 5 March 2010, Mabel Tam of NWL sent Fair Work Inspector Toonen a letter on behalf of the Respondent in response to the NTP served on 17 February 2010. The following documentation was enclosed with the letter:
(a)a list of the Employees, including details of their position, duty and job description;
(b)a summary of the monthly salary payments for each of the Employees (translated and in Chinese);
(c)a summary of the employment contracts for each of the Employees (translated);
(d)the employment contracts for each of the Employees (in Chinese only);
(e)bank transfer records with respect to electronic transfers of fixed wage payments (not including travel expenses and performance assessments, which were paid in cash) made to the Respondent’s employees in January 2010 and February 2010;
(f)the Respondent’s business licence (in Chinese only); and
(g)contracts entered into by the Respondent with Kilic (translated and in Chinese).
The Respondent offered to facilitate the translation of documents if required.
42.On 11 March 2010, Fair Work Inspectors Smith and Toonen met with Ms Tam of NWL at NWL’s office. During that meeting, Fair Work Inspector Toonen advised Ms Tam of the additional information required pursuant to the NTP served on the Respondent on 17 February 2010, including with respect to the Respondent’s employees’ periods of employment in Australia, description of the employees’ qualifications, and clarification regarding the spreadsheet containing the employees’ wage details.
43.On 15 March 2010, Ms Tam of NWL sent Fair Work Inspector Toonen two letters containing additional information and documentation as requested at the meeting on 11 March 2010, including:
(a)a list of the periods during which the Employees were working for the Respondent in Australia;
(b)records relating to the qualifications for each of the Employees;
(c)a statement that the Respondent did not refer to an Australian Industrial Award in terms of payment of salaries to its employees;
(d)a statement that payslips for each of the Employees have been kept in China for their collection on their return to the head office;
(e)a copy of the Respondent’s Certificate of Incorporation (in Chinese only); and
(f)bank transfer records with respect to electronic transfers of fixed wage payments (not including travel expenses and performance assessments, which were paid in cash) made to the Respondent’s employees in January 2010 and February 2010, with each of the Employees specifically identified.
The Respondent offered to facilitate the translation of documents if this would be of assistance.
44.On 18 March 2010, Fair Work Inspectors Toonen and Smith met with Ms Tam of NWL at NWL’s office. During that meeting, Fair Work Inspector Toonen provided Ms Tam with a spreadsheet containing a calculation of underpayments with respect to the Employees. The calculation estimated the underpayments at $162,492.76, based on the minimum rates of pay contained in the FMW, the national minimum wage order, the Australia Pay and Classification Scale (APCS) derived from the Metal Industry (SA) Award and the APCS derived from the Professional Engineers (General Industries) Award.
45.On 19 March 2010, Ms Tam of NWL sent Fair Work Inspectors Toonen and Smith an email in which she stated, on instruction from the Respondent:
(a)each of the Employees were entitled to an overseas travel allowance of AUD$110 per day, based on the duration of the Employees’ stay in Australia (not based on the hours of work);
(b)from the overseas travel allowance, each of the Employees’ accommodation and food expenses were deducted, leaving on average AUD$90 per day;
(c)the overseas travel allowance was paid to the Employees upon their return to China (not while they were in Australia).
46.On 23 March 2010, Fair Work Inspectors Trundle, Toonen and Brenton Otte met with Ms Tam of NWL at NWL’s office to discuss the calculation of underpayments previously provided on 18 March 2010. In particular, Ms Tam stated that the calculations did not include the overseas travel allowance amounts. Fair Work Inspector Trundle informed Ms Tam that those amounts would only be considered if satisfactory evidence was provided in respect of them.
47.On 24 March 2010, Ms Tam of NWL sent Fair Work Inspectors Toonen and Smith an email attaching the Respondent’s records regarding payment of the overseas travel allowance. Ms Tam stated that she was instructed by the Respondent that the employees who had collected their allowance had initialled the form. The attachment revealed initials beside 22 of the 24 Employees. The Respondent says that the remaining Employees have subsequently collected their allowance.
48.On 25 March 2010, Ms Tam of NWL sent Fair Work Inspectors Toonen and Smith an email providing further clarification regarding the bank transfer documents and the salary summary spreadsheet provided on 5 March 2010.
49.On 29 March 2010, Fair Work Inspectors Smith and Toonen met with Ms Tam of NWL at NWL’s office. During that meeting:
(a)Fair Work Inspector Toonen inquired as to the appropriate representative of the Respondent to attend a ROI. Ms Tam indicated that Mr Zhang of the Respondent would likely be the appropriate representative.
(b)Fair Work Inspector Toonen explained that the overseas travel allowance could not be offset from the wages paid to the Employees and it would therefore not be taken into account in the calculation of underpayments. Ms Tam indicated that she would seek further instructions from the Respondent regarding the overseas travel allowance.
50.On 30 March 2010, Fair Work Inspector Toonen sent Mr Zhang of the Respondent a letter requesting his attendance at a ROI on 15 April 2010.
51.On 1 April 2010:
(a)Fair Work Inspector Toonen had a telephone conversation with Ms Lamond of NWL in which Ms Lamond requested a change of date for Mr Zhang’s ROI scheduled for 15 April 2010. Fair Work Inspector Toonen advised her preference for the ROI to be rescheduled to 6 or 7 April 2010.
(b)Fair Work Inspector Toonen had a telephone conversation with Lincoln Smith of NWL in which Mr Smith advised that Mr Zhang was not available on 6 or 7 April 2010 and had not yet determined whether he was prepared to be interviewed.
52.On 6 April 2010:
(a)Fair Work Inspector Toonen had a telephone conversation with Ms Tam of NWL in which Ms Tam confirmed Mr Zhang’s availability to attend the ROI on 15 April 2010.
(b)Fair Work Inspector Smith served the Respondent with a NTP requiring the production of:
(i) employment records for employees employed by the Respondent and working in Australia during the period from 18 February 2010 to 6 April 2010;
(ii) documentation relating to any applications made by the Respondent to DIAC for visas for the Respondent’s employees; and
(iii) documentation in relation to any applications made by the Respondent to DIAC for overseas business sponsorship status,
by 3.00 p.m. on 21 April 2010.
(c)Fair Work Inspectors Smith and Graham Willcox met with Ms Tam of NWL at NWL’s office to discuss what was required pursuant to the NTP served on 6 April 2010.
(d)Ms Tam sent Fair Work Inspectors Toonen and Smith an email attaching further information (in Chinese and not translated) provided by the Respondent regarding the overseas travel allowance.
53.On 15 April 2010:
(a)Fair Work Inspectors Toonen and Smith conducted a ROI with Mr Zhang of the Respondent at NWL’s office in the presence of Ms Tam and Mr Smith, both of NWL.
(b)Fair Work Inspector Smith handed Mr Zhang of the Respondent a Determination of Contraventions letter (contravention letter). The contravention letter:
(i) identified contraventions of sections 293 and 536 of the FW Act (relating to a failure to pay minimum rates of wages and a failure to provide pay slips respectively);
(ii) explained that the total underpayment arising from the identified contraventions was $131,323.79 gross;
(iii) attached a spreadsheet containing a calculation of underpayments with respect to the Employees;
(iv) required rectification of the underpayment contraventions by 4 May 2010; and
(v) explained that a possible consequence of the contraventions included the commencement of litigation.
54.On 21 April 2010, Ms Tam of NWL sent Fair Work Inspector Toonen a letter attaching documentation in response to the NTP served on the Respondent on 6 April 2010, including:
(a)a table of payments made to each of the Employees between 18 February 2010 and 2 March 2010, indicating that fortnightly payments ranged from between CNY1571.19 and CNY5087.05 (including amounts paid for tax, pension and insurance);
(b)a table specifying that the monthly payment rates in relation to 9 of the Employees for the period between 22 March 2010 and 6 April 2010 were between AUD$5,750 and AUD$7,083.33 (the letter advised that information relating to payments made to the Employees between 22 March 2010 and 6 April 2010 was not currently available but advised that no allowances were paid during that period); and
(c)the Respondent’s overseas travel payment policy, in which it is stated that the methods of payment of the overseas travel payment are:
(i) for short-term overseas business travel (up to 3 months), a one-off lump sum payment in China on return;
(ii) for medium-term overseas business travel (over 3 months but less than 6 months), a one-off lump sum payment on return to China, or checked and approved on a monthly basis and to be paid in China; and
(iii) for long-term business overseas business travel (exceeding 6 months), to be checked and approved monthly and to be paid in China, unless an individual expresses the wish for the allowance to be paid outside China, in which case taxation payments would be borne by the individual.
55.On 4 May 2010, Mr Smith of NWL sent Fair Work Inspector Toonen a letter in response to the contravention letter, in which Mr Smith stated that the Respondent considered the underpayment calculations to be incorrect because they did not take into account the overseas travel allowance.
(a)disputes that it had failed to comply with the pay slips obligations because it had an agreement with the Employees that their pay slips be provided to them and left for collection at the China office.
56.On 25 May 2010, Fair Work Inspector Toonen had a telephone conversation with Mr Zhang of the Respondent and an interpreter of the Respondent with respect to a planned FWO visit to the MMAL Site on 27 May 2010.
57.On 27 May 2010, Fair Work Inspectors Toonen and Latz conducted interviews with 7 of the Employees in the presence of the Respondent’s interpreter, a Translating and Interpreting Service Mandarin interpreter and Ms Tam of NWL. During those interviews:
(a)all 7 of the Employees confirmed that they had each received their overseas travel allowance and signed the Australia Project International Subsidy Sheet in confirmation of receipt; and
(b)the 7 Employees confirmed that they had received these amounts upon their return to China.
RESPONDENT’S CONDUCT POST 4 MARCH 2010
58.Once the correct subclass 457 visas were issued, the Respondent paid the employees a monthly wage only, ranging from $AUD69,000pa to $AUD85,000pa in lieu of their Chinese wage and Overseas Travel Allowance. The quantum of these wages was a condition of the visas. The Department of Immigration and Citizenship conducted a monitoring exercise in September 2010 to ascertain the Respondent’s compliance with its obligations as a subclass 457 visa sponsor, including its compliance with paying the correct wages. By letter dated 10 November 2010, the Department confirmed that the monitoring results were satisfactory.
AGREEMENT ON PENALTY
59.The contraventions of section 323(1) of the FW Act with regard to the Employees have common elements and this should be taken into account in considering an appropriate penalty to ensure that the Respondent is not punished more than once for the same or substantially similar conduct.
60.The Applicant and the Respondent agree that the Respondent’s contraventions fall into 1 distinct group.
61.Accordingly, the maximum penalty that can be imposed on the Respondent for the contraventions is $33,000.”
The applicant provided the Court with written submissions. The applicant’s submissions on penalty were in the following terms:
“INTRODUCTION
1.This matter relates to 24 employees (listed in Attachment A to the Applicant’s Amended Statement of Claim filed on 3 February 2012 (ASOC) and hereafter collectively referred to as the Employees) employed by the Respondent.
2.The Employees were Chinese nationals, working in Australia from 29 October 2009 to 4 March 2010 (the Relevant Period) on visas issued by the Department of Immigration and Citizenship (DIAC). The Respondent paid the Employees for their work in Australia by a combination of payments made monthly during their time in Australia and a lump sum payment made after their return to China at the end of the Relevant Period.
3.These are the Applicant’s submissions on penalty in respect of the admitted contraventions by the Respondent of the Fair Work Act 2009 (Cth) (FW Act).
4.The Applicant relies upon the:
(a)Revised Statement of Agreed Facts, filed on 14 September 2012 (RSAF);
(b)Affidavit of Brodie Smith, dated 12 August 2011 (Smith Affidavit);
(c)Affidavits of the Employees filed on 26 September 2011, as itemised in Annexure A to these Submissions (the Employee Affidavits);
(d)Affidavit of Toby Zhang Xu, filed on 26 September 2011 (Xu Affidavit).
BACKGROUND
Alleged Contraventions and Orders sought
5.In the ASOC, the Applicant alleged that the Respondent contravened each of the following provisions in respect of the 24 Employees:
(a)item 5 of Schedule 16 of the Transitional Act in that the Respondent failed to pay the Employees a rate of pay at least equal to the transitional standard federal minimum wage (FMW);
(b)section 293 of the FW Act in that the Respondent failed to pay the Employees a rate of pay at least equal to the national minimum wage contained in the transitional national minimum wage order; and
(c)section 323(1) of the FW Act in that the Respondent failed to pay to the Employees monies payable to them in relation to their work in Australia in full at least monthly.
6.By a Notice of Discontinuance filed on 24 August 2012, the Applicant discontinued its claim to the extent that it dealt with the allegations in sub-paragraphs 5(a) and (b) above.
7.The Applicant is seeking:
(a)the imposition of a pecuniary penalty on the Respondent under subsection 546(1) of the FW Act for the contraventions of section 323(1) of the FW Act; and
(b)an order pursuant to subsection 546(3)(a) of the FW Act that any pecuniary penalty imposed on the Respondent be paid to the Consolidated Revenue Fund of the Commonwealth.
Admissions
8.The Respondent filed an Amended Defence on 29 February 2012, in which the Respondent admitted the contraventions of section 323(3).[1]
[1] See paragraph 11 of the Amended Defence.
9.The parties filed the RSAF on 14 September 2012, which contains admissions by the Respondent of the relevant facts which constitute the contraventions alleged in the ASOC.[2]
[2] See paragraphs 19 to 28 of the RSAF.
RELEVANT LEGISLATIVE PROVISIONS
10.These proceedings are brought by the Applicant under the FW Act in relation to contraventions occurring after the commencement of the FW Act on 1 July 2009.
11.At all material times during the Relevant Period, the Respondent was obliged pursuant to subsections 323(1) and (2) of the FW Act to pay to the Employees amounts payable in respect of the performance of work:
(a)in full;
(b)in money by one or a combination of the following methods:
(i)cash;
(ii)cheque, money order, postal order or similar order, payable to the employee; and/or
(iii)the use of an electronic funds transfer system to credit an account held by the employee; and
(c)at least monthly.
Standing under the FW Act
12.The Applicant has standing pursuant to section 539 of the FW Act to bring these proceedings.
13.Subsection 546(1) of the FW Act enables the Court to impose a penalty in respect of a contravention of a civil remedy provision. By virtue of subsections 539(1) and (2) of the FW Act, section 323 of the FW Act is a civil remedy provision.
Maximum Penalties
14.Subsection 557(1) of the FW Act provides that when two or more contraventions of certain civil remedy provisions (including subsection 323(1) of the FW Act[3]) are committed by the same person, and the contraventions arose out of a course of conduct by the person, the contraventions shall, for the purposes of Part 4-1 of the FW Act, be taken to constitute a single contravention.
[3] See subsection 557(2) of the FW Act.
15.Section 12 of the FW Act provides that “penalty unit” has the same meaning as in the Crimes Act 1914 (Cth) (Crimes Act). Section 4AA of the Crimes Act defines “penalty unit” to be $110.
16.Pursuant to subsections 539(2) and 546(2) of the FW Act, the maximum penalty that may be imposed on a body corporate by the Court in relation to a contravention of section 323(1) of the FW Act is 300 penalty units (or $33,000).
THE COURTS APPROACH TO DETERMINING PENALTIES
17.The Applicant suggests the following approach for the Court to follow in determining an appropriate penalty to impose on the Respondent for the admitted contraventions.
18.The first step for the Court is to identify the separate contraventions involved. As outlined in paragraph 14 above, however, subsection 557(1) of the FW Act provides for treating multiple contraventions of the same provision as a single contravention where the contraventions arise out a course of conduct by a person.
19.Secondly, the Court will then consider an appropriate penalty to impose in respect of each contravention (whether a single contravention alone or as part of a course of conduct) having regard to all the circumstances of the case.
20.Thirdly, the Respondent should not be penalised more than once for the same conduct, which may require that contraventions arising from the same conduct be grouped together and treated as one for penalty purposes, even where the requirements of section 557(1) of the FW Act do not apply[4]. In this regard, the penalties imposed by the Court should be an appropriate response to what the Respondent did.[5] This task is distinct from, and in addition to, the final application of the “totality principle” (see below).[6]
[4] This consideration is not of significance in this matter as the relevant conduct gives rise only to admitted contraventions of a single provision of the FW Act rather than multiple provisions of the Act, and further, it is submitted that section 557(1) of the FW Act applies to treat each contravention of that one provision as a single contravention for penalty purposes.
[5] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at 571 [46] (Graham) J (Merringtons).
[6] Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 at [41]-[46] (Stone and Buchanan JJ) (Mornington Inn).
21.Fourthly and finally, having fixed an appropriate penalty for each separate contravention, course of conduct, or group of contraventions the Court should take a final look at the aggregate penalty[7], to determine whether it is an appropriate response to the conduct which led to the contraventions. The Court should apply an “instinctive synthesis” in making this assessment.[8] This is what is known as an application of “the totality principle”.[9]
[7] See Kelly v Fitzpatrick (2007) 166 IR 14 at [30] (Tracey J) (Kelly); Merringtons, supra at 567 [23] (Gray J), 576 [71] (Graham J) and 583 [102] (Buchanan J).
[8] Merringtons, supra at 567-7 [27] (Gray J) and 572 [55] and 577 [78] (Graham J).
[9] Mornington Inn, supra at [41]-[46] (Stone and Buchanan JJ).
APPLICATION OF THE LAW TO THE FACTS
Identified contraventions & maximum penalty
22.The Respondent contravened subsection 323(1) of the FW Act in respect of each of the 24 Employees.
23.Each of the contraventions in relation to the payments required to be made to the 24 Employees over the Relevant Period was committed by the Respondent and arose out of a single course of conduct by the Respondent. If this is not correct, then it is submitted that the contraventions arose from the same conduct and, as such, should be grouped together and treated as one for penalty purposes.
24.As such, the maximum penalty that the Court can, or should, impose on the Respondent is $33,000 in respect of a single contravention or group of contraventions of subsection 323(1) of the FW Act.
Factors relevant to penalty
25.A non-exhaustive list of factors potentially relevant to the imposition of a penalty under the FW Act has been summarised by Mowbray FM in Mason v Harrington Corporation Pty Ltd[10] (in the context of the imposition of a penalty under the WR Act) as follows:
[10] [2007] FMCA 7 at [26] – [59].
(a)the nature and extent of the conduct which led to the contraventions;
(b)the circumstances in which the conduct took place;
(c)the nature and extent of any loss or damage sustained as a result of the contraventions;
(d)whether there had been similar previous conduct by the respondent;
(e)whether the contraventions 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 contraventions were deliberate;
(h)whether senior management was involved in the contraventions;
(i)whether the party committing the contravention had exhibited contrition;
(j)whether the party committing the contravention had taken corrective action;
(k)whether the party committing the contravention 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.
26.This summary was adopted by Tracey J in Kelly.[11] While the summary is a convenient checklist, it does not prescribe or restrict the matters which may be taken into account in the exercise of the Court’s discretion.[12]
[11] Supra at [14].
[12] Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550 at [11] (unreported, Federal Court of Australia, 3 October 2007, Gyles J); Merringtons, supra at 580 [91] (Buchanan J).
27.The factors relevant to this matter and the question of appropriate penalties are addressed in turn below.
Nature and extent of the conduct
28.The contraventions affected 24 employees employed by the Respondent and resulted in those Employees being denied the benefit of Australian minimum wages for the duration of their residence in Australia, albeit that all amounts owing were paid to the Employees, and the effects of the contravention were therefore, to the extent that the effects were capable of remedy, ameliorated or remedied, upon the return of the Employees to China in or around March 2010.
29.During their residence in Australia, the Employees received from the First Respondent:[13]
[13] See paragraphs 23 to 28 of the RSAF.
(a)a basic wage of between approximately AUS$1.90 per hour and approximately $6.75 per hour (Basic Salary); and
(b)supplementary payments of $400 per month. This amount represented a part-payment of the Employees’ total Overseas Travel Payment entitlement of approximately AUS$622 per week.
30.Having regard to the number of hours worked each month by the Employees,[14] the supplementary payments made during the Relevant Period amounted to approximately $2.42 per hour on top of the Basic Salary. In total, therefore, the Employees received from the Respondent during their residence in Australia wages of approximately AUS$4.32 to AUS$9.12 per hour.
[14] See sub-paragraphs 19(e) and 19(f) of the RSAF.
31.The balance of the Employees’ Overseas Travel Payment was paid upon the Employees’ return to China. It is not disputed that the amount ultimately received by the Employees was over and above the Respondent’s minimum wage obligations under the FW Act.
32.However, the applicable minimum wage payable to the Employees during the Relevant Period was $14.31 per hour.[15] As such, the Respondent’s failure to pay all wages on time according to the requirements of the FW Act represented an effective failure to provide the Employees with their minimum entitlements under the FW Act for a period of up to approximately four months (i.e. from the commencement of the Relevant Period until the Employees’ return to China). The failure of the Respondent to pay all wages in full and on time necessarily means that the Employees were deprived of the opportunity of enjoying their full entitlements as and when they became due under Australian law.
[15] See paragraph 21 of the RSAF.
33.A failure to comply with section 323(1) of the FW Act, particularly in circumstances where that failure extends for up to four months, is not a trivial or technical breach of the legislation. It is the object of workplace relations legislation to provide an effective safety net of minimum terms and conditions of employment.[16] That part of the safety net which relates to minimum wages can only be effective if those wages are paid progressively and on time. Those safety net obligations apply to all persons who are subject to the FW Act, and the gravity of the contravention is not lessened by the fact that the employer in this instance was a foreign corporation which was employing foreign nationals in Australia for a limited period of time.
[16] Fair Work Ombudsman v Turbo Cafe Watergardens Pty Ltd & Anor [2012] FMCA 794; see also section 3(a) of the FW Act.
34.The fact that the maximum penalty for a contravention of section 323(1) of the FW Act is the same as for contraventions of the “core provisions” of the FW Act, including contraventions of the National Employment Standards and provisions of modern awards and enterprise agreements,[17] reflects the critical importance of section 323(1) of the FW Act to the general safety net of terms and conditions established by the legislation.
35.The fundamental nature of the contravention and the Respondent’s flouting of the relevant legislative provision displays a disregard for the Respondent’s statutory obligations.
Circumstances in which the conduct took place
36.During the Relevant Period, the Employees were granted subclass 456 visas to allow them to enter Australia and work for the Respondent at the Mitsubishi Motors Australia Ltd Site (MMAL Site) on a project involving the disassembly and packing of machinery for shipment from Adelaide to China (Project).[18]
37.Each of the Employees was vulnerable by reason of his or her visa status and limited English-speaking skills[19]: they had limited, if any, opportunity to seek other employment while in Australia. Further, it can reasonably be inferred that the Employees were unfamiliar with Australian workplace laws and had minimal, if any, knowledge of their rights under Australian workplace laws.
38.The Employees were forced to rely on the Respondent for their accommodation, food and other incidental expenses (such as laundry and dish-washing detergent) during the Relevant Period.[20]
39.The Respondent provided the Employees with basic dormitory-style accommodation, in which the Employees slept in rooms containing two bunk beds or in a small hall that had seven beds.[21] By reason of the amounts paid to the Employees while they were in Australia, they did not have the means or opportunity to seek alternate living arrangements (even if they had wished to make alternative arrangements to those organised by the Respondent).
40.The inability of the Employees to utilise their full wage entitlements while in Australia during the Relevant Period deprived them of an opportunity to enjoy the privileges and lifestyle usually associated with working in Australia. Notwithstanding some activities organised by the Respondent for the Employees,[22] the withholding of a substantial part of the Employees’ wage entitlements until their return to China denied the Employees the ability to make their own choices regarding what activities and opportunities to pursue while in Australia.
41.The Employees have given evidence indicating that they were content to receive part of their money upon return to China because they said that they could not “bank the money in Australia and to carry the money around would be too dangerous and a threat to my personal safety”[23]. In circumstances where there was apparently no impediment to the Employer paying the Employees’ Basic Salary by way of transfers on a monthly basis into the Employees’ bank accounts[24], however, it is submitted that the supplementary payments could and should have been paid in the same manner.
42.The Employees assert that they were entitled to request from the Respondent additional payments during their time in Australia up to the total amount of their overseas wage subsidy.[25] However, the obligation of ensuring compliance with the FW Act rests upon employers and an employer must pay minimum entitlements at the proper time whether or not its employees request them to do so.
[17] See Items 1 to 4 of section 539(2) of the FW Act.
[18] See paragraphs 14 to 16 of the RSAF.
[19] See paragraph 5(a) of the Smith Affidavit; paragraph 3 of the Employee Affidavits.
[20] See subparagraphs 45(b) of the RSAF , paragraph 6.2 of the Employee Affidavits, paragraphs 6 and 7 of the Smith Affidavit and Exhibit BJS-3 to the Smith Affidavit (pages 37 and 38).
[21] See paragraph 5(b) of the Smith Affidavit.
[22] See paragraph 12 of the Employee Affidavits.
[23] See paragraph 6.1 of the Employee Affidavits.
[24] See paragraph 22.1 of the Xu Affidavit.
[25] See paragraph 6.4 of the Employee Affidavits.
Nature and extent of the loss or damage
43.At all material times during the Relevant Period the Employees were paid by the Respondent an effective wage of approximately AUS$4.32 to AUS$9.12 per hour (see paragraphs 29 to 30 above) for the work they performed at the MMAL Site.
44.At all times during the Relevant Period, the applicable minimum wage was $14.31 per hour. The Employees were therefore underpaid between $9.99 and $5.19 per hour, or between 70% and 36% of their hourly entitlements, for the duration of the Relevant Period
45.Notwithstanding that the Respondent paid to the Employees upon their return to China amounts which took the Employees’ wages above the minimum required level (and in that sense cured any breach of the minimum wage provisions that would otherwise have arisen),[26] the Employees were deprived of their full entitlements for the four months during which they were engaged in Australia during the Relevant Period. The impact that this had on the Employees is dealt with in paragraphs 38 to 42 above.
[26] See paragraph 28 of the RSAF.
Similar previous conduct
46.Prior to the Relevant Period, the Respondent did not have any dealings in Australia.[27] As such, the Applicant is not aware of and does not believe there to have been any previous findings of contraventions of Commonwealth workplace laws by the Respondent.
[27] See subparagraph 13(b) of the RSAF.
Whether the contraventions arose out of the one course of conduct
47.As set out in paragraphs 23 to 24 above, the Applicant submits that the contraventions affecting each of the 24 Employees should be treated as comprising a single course of conduct by the Respondent and, consequently, as giving rise to a single contravention of section 323(1) of the FW Act, by reason of subsection 557(1) of the FW Act.
48.No further course of conduct considerations arise in this case.
Size of the business and financial circumstances of the business
49.The Respondent is and was at all material times a body validly incorporated in accordance with the laws of the People’s Republic of China.
50.The Respondent employed, as at 26 September 2011, 735 employees and had a dedicated human resources department.[28]
[28] See paragraphs 6 and 50 of the Xu Affidavit.
51.The Respondent is a well-resourced company, experienced in conducting its business in other countries. The Respondent’s significant financial resources are demonstrated by the fact that the company invested over AUS$7 million in completing the Project in Australia.[29]
[29] See Exhibit BJS-8 of the Smith Affidavit (page 82); see also paragraph 49 of the Xu Affidavit.
52.Having regard to the above matters, the Respondent is clearly not a small business. Indeed, it is a business of significant size and resources.
53.In addition, the Respondent’s Overseas Travel Allowance Policy was formulated in 2005 as a result of an increase in overseas projects undertaken by the Respondent.[30] It is reasonable to infer that the Respondent was sophisticated enough to discharge its legal obligations, including with respect to employment laws, in each country in which it was undertaking project work.
[30] See Exhibit BJS-5 to the Smith Affidavit (page 54).
54.At least since the commencement of the Applicant’s investigation into the Employees’ employment, the Respondent has had access to local legal advice through the South Australian law firm, Norman Waterhouse. It was open to the Respondent to seek advice prior to commencing the Project from Norman Waterhouse’s (or any other Australian solicitor’s) employment and industrial relations team regarding its legal obligations under Commonwealth workplace laws.
Deliberateness of the contraventions
55.The Applicant accepts that there is no direct evidence to suggest that the Respondent deliberately sought to contravene Australian workplace laws while it was engaged by the Beijing Automotive Industry Holding Co (BAIC) on the Project. The Applicant does not make that submission.
56.The Respondent, through Mr Zhang Xu, asserts that “our contravention was the result of our failure to completely understand Australian labour law... Before we arrived in Australia, no authority advised us that these laws applied”.[31]
[31] See paragraph 56.1 of the Xu Affidavit.
57.However, the Respondent’s claimed ignorance of Australian workplace laws is no excuse for its contraventions; the obligation was on the Respondent, as an employer, to ascertain and stay abreast of its obligations in respects of its employees. The Respondent cannot displace this obligation onto third parties to advise the Respondent of its legal obligations.
58.Mr Zhang’s response, and the Respondent’s conduct, leads to a conclusion that the Respondent was wilfully blind or had a reckless disregard as to its obligations with respect to the Employees rather than thinking that Australian law had no application to the Respondent in relation to its employment of the Employees. It appears from the Xu Affidavit that the Respondent does not contend that it was under any mistaken assumption that Australian law had no application to the employment of the Employees whilst in Australia.
59.Any business, whether local or foreign, that engages employees to perform work in Australia is under an obligation to inform themselves as to the content of, and to abide by, Australian workplace laws. A business is not entitled to rely on third parties to supply information about its obligations as an employer.
Involvement by senior management
60.There is no direct evidence to suggest that the Respondent’s senior management was not involved in the identified contraventions. It is reasonable to infer that senior management was involved in the setting of the Employees’ hourly wages and the application of the Overseas Travel Allowance Policy, including the decision to pay the supplementary wages upon the Employees’ return to China.
Contrition, corrective action and co-operation with authorities
61.This factor involves three related, yet separate elements. These are dealt with in turn below.
Contrition
62.The Respondent has admitted the contraventions and accepted that the way in which the Respondent paid the Employees their salaries did not meet the requirements of Australian labour laws.[32]
[32] See paragraph 46 of the Xu Affidavit.
63.However, the Respondent has at no time acknowledged the disadvantage suffered by the Employees by not receiving their minimum wage entitlements during the Relevant Period. Indeed, the Respondent positively asserts that the Employees suffered no detriment by reason of its contraventions.[33]
[33] See paragraph 56.2 of the Xu Affidavit.
64.There is also no evidence before the Court that the Respondent has apologised to the Employees.
Corrective action
65.The Applicant accepts that the payments made by the Respondent to the Employees upon their return to China fully satisfied, and even went beyond, the Respondent’s minimum wage obligations.
66.Nevertheless, the effects of the failure to pay those monies on time as required by section 323(1) of the FW Act resulted in detriment to the Employees during their residency in Australia (as set out in detail in paragraphs 38 to 40) that could not be rectified by the payment, in full, of monies owing upon the Employees’ return to China. Consequently, the payment of those monies in or around March 2010 should not be seen as corrective action for penalty and mitigation purposes.
67.From on or about 16 March 2010, the Respondent paid its employees, who were by then engaged in Australia on subclass 457 visas, between AUS$69,000 and AUS$85,000 per annum in lieu of their Basic Salary and Overseas Travel Payment (Subclass 457 Wages).[34]
[34] See paragraph 58 of the RSAF.
68.Given that the Subclass 457 Wages were a condition of the subclass 457 visas being issued[35] (as opposed to the Respondent independently recognising its error and subsequently seeking to change its wage practices), this should not be taken into account by the Court as demonstrating corrective action taken by the Respondent in respect of the identified contraventions. This is supported by the Respondent’s lack of contrition, as set out in paragraphs 63 to 64 above.
[35] See paragraph 58 of the RSAF.
Co-operation with authorities
69.During the investigation, the Respondent generally cooperated with the Applicant’s Fair Work Inspectors by providing documents that were sought through various Notices to Produce issued upon the Respondent and by participating in Records of Interview.[36] Further, the Respondent generally either provided a translated copy of any Chinese documents produced in response to the Notices to Produce or otherwise offered to facilitate the translation of any Chinese documents that had not yet been translated.[37]
[36] See especially paragraphs 32 to 34, 41 to 43, 53 to 54 of the RSAF.
[37] See paragraphs 41 and 43 of the RSAF.
70.Although there were some delays in the production of all documents sought by the Notices to Produce, the Respondent generally advised the Applicant’s Fair Work Inspectors of any delays with the production of documents and provided reasons for those delays.
71.Further, the Respondent admitted the contraventions and worked with the Applicant to prepare the RSAF, setting out the Respondent’s admitted contraventions and the facts underlying those contraventions. The Applicant recognises that the Respondent’s conduct in this regard has avoided the need for a contested hearing on liability and the need for extensive affidavit or oral evidence on penalty, thereby reducing the cost to the parties and the Court, including in terms of time and resources.
72.The Respondent’s cooperation should be taken into account by the Court in assessing the appropriate penalty.
Ensuring compliance with minimum standards
73.This is an important consideration in the present case. One of the principal objects of the FW Act is the maintenance of an effective safety net of employer obligations and effective enforcement mechanisms. As set out in paragraphs 33 and 34 above, the requirement to pay wages at certain minimum frequencies is an integral part of the safety net established by the FW Act.
74.The substantial penalty set by the legislature for contraventions of this obligation reinforces the importance placed on compliance with this minimum standard.
Specific and general deterrence
75.Both general and specific deterrence are relevant in the present case.
Specific deterrence
76.The Respondent should be left in no doubt that failing to comply with minimum obligations is unacceptable in the Australian community and will not be tolerated by the Courts.
77.Although the Respondent has accepted that its conduct did not comply with the FW Act, it has not (as set out above) acknowledged that the Employees suffered any detriment by reason of that conduct. Given this, and having regard to the strong possibility that the Respondent will continue or recommence its business operations in Australia, specific deterrence remains a core objective concerning the Respondent in this case.
General deterrence
78.Given the vulnerability of visa workers in the Australian community, general deterrence is particularly important in this matter.
79.General deterrence is an important factor in circumstances where an employer has failed to comply with statutory minimum terms and conditions in respect of its employees, especially where this has affected vulnerable employees. The Court should mark its disapproval of the conduct in question and set a penalty which serves as a warning to others.[38]
80.There is a need to send a message to the community at large, and foreign companies in particular, that not only must correct employee entitlements be paid but that they must be paid in the correct manner and at the proper time so as to give the employees the full benefit of those entitlements. To foreign companies, particularly, the message should be that structuring payments in such a way that their employees are denied the opportunity to enjoy the lifestyle and privileges ordinarily associated with employment in Australia is unacceptable.
81.Furthermore, employers should be reminded that they are obliged to take positive steps to ascertain and comply with their minimum obligations.
Grouping of contraventions
82.In circumstances where the application of section 557(1) of the FW Act means that there is effectively only one contravention of the FW Act, no considerations arise in relation to grouping on the basis of common elements, unless the parties are wrong about the application of section 557(1) of the FW Act, in which case it is submitted that the contraventions would be grouped as set out in paragraph 23 above.
Totality principle and “instinctive synthesis” test
83.Having fixed an appropriate penalty for each contravention 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 contraventions.
[38] Kelly, supra at [28], and the cases cited therein. See also Ponzio v B & P Caelli Constructions Pty Ltd & Others (2007) 158 FCR 543 at 559-60 [92] (Lander J).
CONCLUSION AND RECOMMENDATIONS
84.A consideration of the relevant factors in this case indicates that the matter merits a penalty that is more than nominal. In all the circumstances, the Applicant submits that a low to mid range penalty in the region of 35-45% of the maximum is called for.
85.In this respect, the Applicant submits that an appropriate penalty range is from $11,550 to $14,850 (ie, 35-45% of $33,000), having regard, in particular, to the importance of employees being paid on time and the Respondent’s continued refusal to acknowledge the importance of this employment entitlement. The Applicant submits that a penalty in this range is in all the circumstances an appropriate response to the Respondent’s conduct.
86.The Applicant seeks orders under subsection 546(3)(a) of the FW Act that any penalty imposed on the Respondent be paid to the Consolidated Revenue Fund of the Commonwealth.”
The respondent provided written submissions on penalty in the following terms:
“Introduction
1The parties filed a revised statement of agreed facts in this matter on 14 September 2012 (Agreed Facts).
2The Applicant has filed written submissions dated 5 October 2012 (Applicant’s Submission), together with the affidavit of Brodie Janelle Smith affirmed on 12 August 2011 (Smith Affidavit)
3In addition to these written submissions, the Respondent has filed the following affidavit material:
3.1Affidavit of Wang Fuchao;
3.2Affidavit of Lu Ming;
3.3Affidavit Lu Bin;
3.4Affidavit Liu Xiangfeng;
3.5Affidavit Liu Chunyou;
3.6Affidavit of Li Zhonghua;
3.7Affidavit of Li Lei;
3.8Affidavit of Zhu Xiaorong;
3.9Affidavit of Li Jichun;
3.10Affidavit of Hao Haifeng;
3.11Affidavit of Dou Yu;
3.12Affidavit of Feng Shuangqi;
3.13Affidavit of Chen Yijun;
3.14Affidavit of Zhu Xiaorong;
3.15Affidavit of Zhou Jiwen;
3.16Affidavit of Zhang Yong;
3.17Affidavit of Zang Jinyuan;
3.18Affidavit of Xie Weiqiang;
3.19Affidavit of Wen Hongtao;
3.20Affidavit of Tang Limin;
3.21Affidavit of Ren Bin;
3.22Affidavit of Zhang Changyi;
(collectively “the Employee Affidavits”)
3.23Affidavit of Toby Zhang Xu (Zhang Affidavit);
3.24Affidavit of Maria Ho (Ho Affidavit);
3.25Affidavit of Lincoln Smith (LS Affidavit).
Background
4In 2009, Mitsubishi Motors Australia Ltd (MMAL) sold a substantial amount of heavy machinery used in the production of car-bodies to a German based company, which on-sold the machinery to the Beijing Automotive Industry Holding Co Ltd (BAIC)[39].
[39] Paragraph 10 of the Zhang Affidavit.
5The Respondent is a second hand equipment and machinery removal company. It was engaged by BAIC to oversee the disassembly and packing of the machinery for shipment from Adelaide to China (Project)[40]. The Respondent was engaged to carry out the dismantling and packaging of press equipment from Mitsubishi Motors Australia Limited (MMAL).
[40] Paragraph 5 of the Zhang Affidavit.
The Respondent
6The Respondent is a Chinese enterprise which has existed for over 50 years and is subordinated to the China National Machinery Industry Corporation.
7The Respondent employs 735 employees[41].
[41] Paragraph 6 of the Zhang Affidavit.
8The Respondent is not a private company, it is a state-owned enterprise in which the Workers Congress holds the ultimate decision-making power. In accordance with Chinese regulations, the Workers Congress is the most powerful and top decision making body of the Respondent. Representatives in the Workers Congress are elected by the workers to represent them in participating in all aspects of the company’s management and decision making. Accordingly, the “employer” in this proceeding is actually, in part, the workers at large, including the 24 employees involved in this proceeding. In the Respondent’s business, the exploitation of the workers does not happen because the workers will not exploit themselves. Because of these factors, the Respondent would not intentionally fail to observe the labour laws of China or the labour laws or any other laws of an overseas country in which they perform work[42].
[42] Paragraph 7 of the Zhang Affidavit.
9The Respondent offers a number of benefits for its employees including medical insurance, endowment insurance, unemployment insurance, industrial injury insurance, maternity insurance and a housing accumulation fund for each employee, out of which employees can buy housing[43].
[43] Paragraph 8 of the Zhang Affidavit.
10All employees who went on assignment to Australia were long term employees of the Respondent. All, with the exception of Yan Wenjing, who recently resigned, remain employed by the Respondent[44].
[44] Paragraph 9 of the Zhang Affidavit.
The Respondent’s Employees
11This proceeding relates to the employment of 24 long term employees of the Respondent who were selected by the Respondent to work on the Project.
12Between 29 October 2009 and 4 March 2010, 24 employees accepted assignments to work on the Project at the MMAL site at Clovelly Park in the State of South Australia. The employees were under no obligation to accept the assignments. The Respondent followed the following set principles when organising overseas assignments:
12.1They confirmed the type of people they need according to the Project.
12.2They then identified the employees with the requisite qualifications and abilities in accordance with the human resources needs of the Project;
12.3They then make necessary arrangements for participating employees to go overseas. For example, for this project, the Respondent needed certain numbers of electrical engineers, mechanical engineers, electrical technicians, mechanical technicians and other professionals. The Respondent confirmed which employees wanted to participate (some could not due to other work commitments and personal reasons). An employee may decline to accept the assignment for personal reasons. It is voluntary. But if available, all employees want to go overseas as it pays more[45].
[45] Paragraph 11 of the Zhang Affidavit.
13The major tasks included commercial negotiation prior to dismantling and the preparation work related to technical specifications before the equipment was disassembled. Each individual part of the equipment needed to have a serial number issued for tracking and reassembly purposes[46].
[46] Paragraph 12 of the Zhang Affidavit.
14The actual dismantling activities were subcontracted to two local Adelaide companies, KILIC Engineering Pty Ltd (KILIC) and United Workforce Pty Ltd (United). Primarily, the 24 employees were engaged to supervise the dismantling of the machinery. The employees did not actually perform the dismantling work[47].
[47] Paragraph 13 of the Zhang Affidavit.
15The role of the employees was to supervise the dismantling process. The Respondent’s employees working in Australia did not compete with any Australian company in relation to the project. To the contrary, the project facilitated the employment of approximately 80 Australian employees through KILIC and United[48].
[48] Paragraph 14 of the Zhang Affidavit.
Visa Applications
16Initially, the 24 employees were issued subclass 456 visas to allow them to come to Australia for the Project. The Respondent understood that these visas are a short stay business visa[49].
[49] Paragraph 15 of the Zhang Affidavit.
17China Sanan sought advice from the Beijing Embassy and Lingai Rowe Import & Export GBR (Rowe), who had previously sent persons to Australia, as to the appropriate visas to use. The Respondent was advised by Rowe that subclass 456 visas would be appropriate. Essentially this was because:
17.1Everyone going to Australia from the Respondent were skilled technical people and it was a short term assignment;
17.2The Respondent did not have any contractual relationship with local Australian companies at the time;
17.3Participating employees would continue to draw salaries from China as well as receiving the overseas subsidy wage on their return to China; and
17.4The Respondent’s project fees would also be paid in China[50].
[50] Paragraph 16 of the Zhang Affidavit.
Based on this advice, China Sanan applied for subclass 456 visas. As this was the Respondent’s first project in Australia, they relied on the expertise of Rowe and the Embassy[51].
[51] Paragraph 16 of the Zhang Affidavit.
18Unlike subclass 457 visas, the subclass 456 visas do not stipulate that Australian Labour laws can apply and must be followed.
19It was not until around February 2010 when the Applicant commenced its investigation and the Department of Immigration and Citizenship (DIAC) cancelled the subclass 456 visas did the Respondent become aware that Australian labour laws needed to be complied with. Up until this point, the Respondent was of the understanding that we were lawfully conducting business activities in accordance with the subclass 456 visas[52].
[52] Paragraph 18 of the Zhang Affidavit.
20Because subclass 456 visas were issued, the Respondent was of the belief that they were in Australia for business purposes and not as employees who were working in Australia and subject to Australian labour laws. The Respondent was not advised by anyone at DIAC that they would need to comply with Australian labour laws[53].
[53] Paragraph 19 of the Zhang Affidavit.
21If the correct visas had initially been issued, then there would have been no misunderstanding as the subclass 457 visas state that Australian labour laws apply and the Respondent would have investigated the specific requirements of those laws[54].
[54] Paragraph 20 of the Zhang Affidavit.
22In hindsight, China Sanan accepts that it was an error to rely on Rowe in the preparation of the visas and in not taking further steps to ascertain whether Australian labour laws apply. The Respondent now seeks independent advice before commencing an overseas project. The Respondent does not want to be in this situation again and apologises for the misunderstanding[55].
[55] Paragraph 21 of the Zhang Affidavit.
Working Arrangements in Australia
23In accordance with Chinese law, China Sanan:
23.1Paid the 24 employees their Chinese wage on a monthly basis into their bank account. These payslips have been provided to the Applicant;
23.2Paid for all of the employees’ accommodation and transportation;
23.3Paid the employees an overseas subsidy wage. This is required under Chinese law and also China Sanan’s policy. When employees travel overseas for work they are entitled to an overseas subsidy wage. The amount is set by the Chinese Government and varies from region to region. The overseas subsidy wage for Australia was US$98 per day. From this amount US$20 per day was deducted for shared expenses like food and other items such as laundry detergent. This meant each of the employees received, in addition to their Chinese wage, wages of US$78 for each day that we were in Australia.
24Each of the employees desired to collect the subsidy wage for overseas work on return to China because:
24.1They could not bank the money in Australia and to carry the money around would be too dangerous and a threat to their personal safety;
24.2While in Australia, the employees did not need to spend much for daily expenses because accommodations, transport and all overseas living expenses were paid for by the Respondent;
24.3The employees voluntarily took meals together as per their custom. Therefore the expenditure on food was not significant and these expenses were paid for on our behalf by the Respondent;
24.4While overseas, each employee received approximately $AUS400 each month of their overseas subsidy wage. Further, the employees could request from the Respondent an amount up to the amount of the overseas subsidy wage if they wished to spend extra money in Australia. The balance of the overseas subsidy wage was paid on my return to China[56].
[56] Paragraph 23 of the Zhang Affidavit and paragraph 6 of the Employee Affidavits.
25Throughout the Applicant’s investigation the Respondent on numerous occasions endeavoured to explain the concept of the overseas subsidy wage to the Applicant and that it forms part of their wages. All the employees understood this to be the case. The Respondent believes that translation issues have caused some confusion and that is why the Applicant does not accept that the overseas subsidy wage forms part of their wages[57]. The Applicant now accepts that the overseas subsidy wage forms part of the employees’ wages.
[57] Paragraph 24 of the Zhang Affidavit.
26The overseas subsidy wage was paid in a lump sum when the employees finished the overseas assignment. This arrangement is in accordance with the Respondent’s internal policy. This policy is set by the Workers Congress, namely the employees in accordance with Chinese Government requirements[58].
[58] Paragraph 25 of the Zhang Affidavit.
27In accordance with the Respondent’s system and the wishes of the employees, the employees received their Chinese salary paid monthly into their Chinese bank accounts and the overseas subsidy wage once they returned to China, but each employee, when overseas, could obtain funds up to the limit of that person’s overseas subsidy wage owing at the time. Therefore the employees were not underpaid or disadvantaged during the 4 months they were in Australia[59].
[59] Paragraph 26 of the Zhang Affidavit and paragraph 6 of the Employee Affidavits.
28Mr Toby Zhang was responsible for managing the overseas subsidy wage and carried a kitty of money to provide to the employees if they requested it. Also each month Mr Zhang provided the employees with between AUS$300-400 as an advance on their overseas subsidy wage[60].
[60] Paragraph 27 of the Zhang Affidavit.
29Although the overseas subsidy wage was paid as a lump sum after the employees returned to China, this did not impact negatively on the employees’ living standards and benefits while they were overseas[61].
[61] Paragraph 28 of the Zhang Affidavit.
30The Respondent did not avoid its responsibilities to bear the costs that it should bear, including accommodation, canteen (including rental of the canteen, gas used in the canteen, stoves, cooking utensils, ingredients etc), transport, return travel expenses, safety gear and ancillary items were all paid for by China Sanan[62].
[62] Paragraph 29 of the Zhang Affidavit.
31Individual employees only paid for his or her share of food consumed as a group and washing items shared by the group. This demonstrates that the Respondent paid for all relevant costs associated with the overseas project including employees’ living expenses. The employees voluntarily agreed to have their share of collective expenses and personal expenses netted off from their wages, being the overseas subsidy wage.
Cultural and Translation Issues
32Throughout the Applicant’s investigation the Respondent encountered a number of language and interpretation issues. These include:
32.1On 10 February 2010 Mr Zhang was interviewed at the MMAL site. Initially, Mr Zhang understood that compliance with the notice to produce documents and request for interview were voluntary as this was what he understood the inspectors to be saying. Mr Zhang was subsequently advised that it was compulsory.
32.2On 15 April 2010 Mr Zhang was interviewed by Ms Monica Toonen and Ms Brodie Smith with the Applicant’s interpreter Ms Lily Sarla. Ms Mabel Tam from Norman Waterhouse lawyers was also present to advise Mr Zhang and ensure that the interpretations were accurate. Throughout the interview Ms Tam had to correct Ms Sarla on many occasions as she was incorrectly interpreting Mr Zhang’s responses to the questions asked and, incorrectly interpreting what Ms Toonen and Ms Smith were asking Mr Zhang. This caused Mr Zhang much concern and he believes that it may be why the Applicant has not properly understood the concept of the overseas subsidy wage. It also led Mr Zhang to question the accuracy of the interpretations provided throughout the Applicant’s investigation when they interviewed the other employees[63].
[63] Paragraph 32 of the Zhang Affidavit.
33The Respondent accepts that it was naïve in relying on Rowe representatives and the subclass 456 visas as the basis of not further exploring whether Australian labour laws applied. The Respondent’s contravention, ie not paying wages at least monthly, was the result of our failure to understand that Australian labour laws applied, particularly the Fair Work Act 2009 (Cth). Before the employees arrived in Australia, no authority advised the Respondent that these laws applied and the Respondent accepts that it should have taken further steps.
34The Respondent did, however, transfer each employee’s Chinese salary in full, on time, to the employee’s personal accounts and in accordance with the requirement of our country and pay the employer’s share of social security payments for the workers and other benefits required by law in China. The Respondent’s contravention was fundamentally the result of it not knowing the payment timing required, and it has apologised for this, but the employees suffered no harm as a result. All the employees preferred this arrangement.
35During the last site inspection by the Applicant on or around 27 May 2010, all employees present at the time confirmed to the Applicant that they have received overseas subsidy wage.
36The 24 employees went to Australia as a team whose common purpose was to complete the MMAL project. The employees who accepted the assignment are all long term employees of China Sanan and they have been treated very well by the Respondent over the years. None of our employees were interested in obtaining any other work in Australia and all returned to China voluntarily on completion of the project to continue working in China[64].
[64] Paragraph 36 of the Zhang Affidavit.
37Before going overseas, the Respondent organised a session to provide information to employees about their rights and obligations overseas pursuant to the subclass 456 visas which had been issued. The Respondent genuinely thought they were acting in accordance with the subclass 456 visas and were compliant with Australian laws[65].
[65] Paragraph 37 of the Zhang Affidavit.
Living Arrangements in Australia
38All the employees voluntarily agreed to share the expenses for food and other common expenditure items incurred by the group. Each person paid for personal incidental expenses out of money that person received from overseas subsidy wage[66].
[66] Paragraph 38 of the Zhang Affidavit.
39This arrangement enabled the employees to eat food they were culturally adapted to, guaranteed individual safety, lowered living expenses for the individual, increased income and maintained living standards[67].
[67] Paragraph 39 of the Zhang Affidavit.
40In China, it is their tradition and culture to minimise wastage. This arrangement allowed the employees to minimise food costs and wastage[68].
[68] Paragraph 40 of the Zhang Affidavit.
41The accommodation provided for the employees in Adelaide was approved by all employees concerned. The accommodation was located in a vacation facility which can sleep more than 60 people and there were only 24 employees so they could choose their own room. The Respondent hired the entire facility for its sole use. None of the 24 employees wished to live somewhere else. By staying together, it was safer for all of them, particularly considering that none of the employees, with the exception of Mr Zhang, could speak any English. The accommodation was located at Lot 50 Whitehead Road, Mylor[69].
[69] Paragraph 41 of the Zhang Affidavit.
42On its website, the accommodation is described as follows[70]:
[70] Paragraph 42 of the Zhang Affidavit.
“The Adelaide Hills Wilderness Lodge offers superb facilities in picturesque hills environment. Situated 30 minutes from the city, an abundance of rare wildlife resides in protected, forest sanctuary bordered by the Mylor Conservation Park and the Onkaparinga River. Whether your guests are visiting for a conference, team-building event or educational retreat they will adore the natural surroundings and modern facilities including a swimming pool, grassed sports oval, basketball stadium and air-conditioned conference room … The commercial kitchen complete with a huge walk in cool store has impressed chefs and catering staff at the ease they can turn out fantastic meals for groups of more than 200 guests. Better still, visitors can explore the sanctuary at night when the hills come alive, then stay the night in cozy rooms with accommodation for up to 140 people.”
43The Respondent’s employees were very satisfied with their work and living arrangements while on overseas assignment in Australia. They had full use of the facilities such as the swimming pool and basketball stadium[71].
[71] Paragraph 43 of the Zhang Affidavit and paragraph 7 of the Employee Affidavits.
44The Respondent’s overseas project department would organise sightseeing activities for these overseas employees while they were on public holidays and weekends. For example, they visited Kangaroo Island, Adelaide Zoo and even went to Melbourne and the Great Ocean Road. All expenses of such activities were paid for by the Respondent and were not deducted from the overseas subsidy wage[72].
[72] Paragraph 44 of the Zhang Affidavit and paragraph 12 of the Employee Affidavits.
45The employees also enjoyed Australian and Chinese statutory holidays while we were working in Australia. They never worked on weekends. Individuals could also choose to go shopping or undertake any other activities as desired. The employees could also obtain advances on their overseas subsidy wage for additional expenses or spending money. The Respondent gave each employee a sum of money each month between AUS$300 to AUS$400 to take care of personal expenses or activities which they may choose to do such as shopping. The employee signed for the money. On return to China, the money was deducted from overseas subsidy wage as it was an advance on their wage[73].
[73] Paragraph 45 of the Zhang Affidavit and paragraph 14 of the Employee Affidavits.
46The way the Respondent calculates wages for employees on overseas assignment takes into account time outside of normal working hours and the employees were paid 2 extra days of wages for weekends. This is because it is impracticable for the employees to return home each weekend. This increases the employee’s usual wage and is a fair wage system for employees deployed overseas[74].
[74] Paragraph 47 of the Zhang Affidavit.
The Court’s Approach to Determing Penalties
47The Respondent agrees with the approach set out at paragraphs 17 to 21 (inclusive) of the Applicant’s Submission.
Factors Relevant to Penalty
48The Respondent agrees with the approach set out at paragraphs 25 and 26 of the Applicant’s Submission.
Nature and extent of the conduct
49At no stage were any of the 24 employees underpaid. In addition to their Chinese wage:
49.1The employees were each paid a overseas subsidy wage equivalent to US$98 per day, for each day the employees were in Australia, irrespective of whether they worked on any particular day;
49.2At all relevant times the exchange rate between the Australian Dollar and American Dollar was approximately AUS$1.00 to US$0.90;
49.3This equates to a subsidy wage of approximately AUS$108 per day or $762 per week.
49.4An amount of AUS$20 per day was deducted from the overseas subsidy wage for food and other incidental items;
49.5Accordingly the employees were paid a net overseas subsidy wage of approximately AUS$622 per week;
49.6All other costs, including accommodation and airfares were paid by the Respondent for the employees.
50The employees have all attested that they agreed to this arrangement and they understood that the overseas wage subsidy formed part of their wages[75].
[75] Paragraphs 13-15 of the Employee Affidavits.
51The Respondent’s breach involves not paying the overseas subsidy wage at least monthly. It was the Respondent’s policy to pay this amount on return to China.
52The employees have all further attested that they would prefer to receive the overseas subsidy wage when they returned to China as carrying around such sums of money would be too dangerous as they could not bank the money in Australia[76]. Further, the employees could access an advance on the overseas subsidy wage whilst in Australia.
[76] Paragraph 6 of the Employee Affidavits.
Circumstances in which the conduct took place
53Contrary to the Applicant’s Submission, the employees were not “forced” to rely on the Respondent for their accommodation, food and other incidental expenses. The employees have all attested they preferred this arrangement and were happy with it, and due to only one of the employee’s speaking English (Mr Toby Zhang), they felt secure and comfortable in their living arrangements by all living together. Further, the employees were not compelled to work in Australia.
54The Applicant’s Submission, with respect, takes no account of the wishes and cultural preferences of the employees.
55The accommodation provided was of a better standard than the employees enjoy in China. The employees all enjoyed the accommodation. Contrary to the Applicant’s Submission, the accommodation was not basic dormitory style accommodation[77].
[77] See paragraph 42 of these submissions.
56The Respondent rented the entire facility for the 24 employees. However, as they are accustomed to, many of the employees chose to sleep in the same rooms[78].
[78] Paragraphs 56.8 and 56.9 of the Zhang Affidavit.
57Further, the Respondent often took the employees on sightseeing and tourist activities on their days off and all the expenses of these activities were paid for by the Respondent. For example, they visited visited Kangaroo Island, Adelaide Zoo and even went to Melbourne and the Great Ocean Road.
58The employees are accustomed to doing things together such as cooking, eating, sight-seeing as they prefer to reduce wastage and felt safe and secure amongst themselves.
59The employees have all attested that they were entitled to draw down on their overseas subsidy wage if they wanted to go shopping or purchase additional items such souvenirs.
60With respect, the Applicant has made many baseless assumptions regarding the wishes and living standards of the employees which are simply incorrect.
Translation issues
61Throughout the Applicant’s investigation, there were significant translation issues. The translators employed by the Applicant often mistranslated what the employees were in fact saying. This, to a large extent could explain why the Applicant has refused initially to accept the Respondent’s position that there has been no underpayment to these employees[79].
[79] Paragraph 32 of the Zhang Affidavit.
Nature and extent of the loss or damage
62The employees suffered no loss or damage and preferred the arrangement of receiving the overseas subsidy wage when they returned to China.
Similar previous conduct
63This was the Respondent’s first project in Australia. There have been no similar breaches of Australian workplace laws.
Whether the contraventions arose out of the one course of conduct
64The Respondent agrees with paragraphs 47 to 48 of the Applicant’s Submissions.
Deliberateness of the contraventions
65The Respondent had no intention of breaching any workplace laws in Australia. This whole matter stems from the Respondent’s employees being issued with the incorrect visas. Unfortunately, the subclass 456 visas were prepared based on advice from Rowe. These visas were short stay business visas. Unlike subclass 457 visas, subclass 456 visas have no condition stipulated that compliance with Australian workplace laws is required. Based on this information, the Respondent was of the belief that its employees were not subject to Australian workplace laws. That is, the Respondent genuinely believed that it was carrying out business activities, rather than employment activities. Although the Respondent now accepts and understands that its belief was mistaken, it was based on legitimate set of circumstances, particularly considering the Respondent had never sent employees to Australia before. Accordingly, the Respondent was not wilfully blind nor did it have a reckless disregard with respect to the employees.
Size of the business and the financial circumstances of the business
66It was not until the issue of the incorrect visas was raised by the DIAC in December 2010 that the Respondent retained the services of Norman Waterhouse lawyers. Prior to this they had relied on the assistance of Rowe.
67When the Applicant commenced its investigation, the Respondent did seek advice from Norman Waterhouse lawyers regarding the employment status of its employees in Australia. Based on this advice, the Respondent amended its practice and instead paid its employees a monthly wage ranging from $69,000 to 85,000 per annum instead of the Chinese wage and wage subsidy. The Respondent continued to pay for the employees’ accommodation and travel expenses.
Involvement by senior management
68The Respondent has always endeavoured to comply with relevant laws in China and the laws of the countries where overseas projects are located. For example, the Respondent was advised by MMAL that its technical staff must receive relevant training from training authorities for their “white card” before they could go on site to conduct the Project. Accordingly on arrival the Respondent immediately contacted the relevant local training authorities to organise the training.
69When setting policies and procedures, particularly Human Resources Policies, the Human Resources department draft the policy with reference to the relevant laws and systems in China, circulate the draft internally for comment and solicit views of every employee. The final version is then approved and adopted by the Workers Congress. The draft policy then becomes the company’s policy. For policies of this nature, including the overseas subsidy wage policy, the company’s executives do not make the decisions. They are set by the Workers Congress[80].
[80] Paragraph 53 of the Zhang Affidavit
Contrition, corrective action and co-operation with authorities
Contrition
70The Respondent has pleaded guilty to the contravention at the earliest possibility and has avoided the requirement for a contested hearing. The Respondent has also apologised for its breach. The Respondent accepts that it should have undertaken further investigations, rather than relying on the advice of Rowe and the embassy. The employees were not disadvantaged whilst they were in Australia. All of the employees have attested that they were happy with their living conditions and that they could seek an advance on their overseas subsidy wage whilst in Australia.
Corrective action
71When the investigations by DIAC and the Applicant commenced, the Respondent sought advice from Norman Waterhouse lawyers regarding the various issues. The Respondent was advised that to comply, China Sanan should instead pay a monthly wage in lieu of the Chinese wage and overseas subsidy wage. The wages varied from AUD69,000 to AUD85,000. This was in response to the Applicant’s investigation and the DIAC investigation. It is true that it was also a requirement of the subclass 457 visas. The Respondent was, at this stage aware that they were non-compliant in relation to the visas and Australian labour laws and they sought to rectify the issue. From 5 March 2010, the Respondent paid the monthly wages of AUD69,000 to AUD85,000[81]. On 27 October 2010 DIAC conducted an investigation to ensure the correct wages had been paid. DIAC confirmed on 10 November 2010 that the Respondent had complied with the subclass 457 visas, including the requirement to pay monthly wages of AUD69,000 to AUD85,000. It is clear that from 5 March 2010, the Respondent had completely corrected its errors and complied for the remainder of the Project.
[81] Paragraph 56.22 of the Zhang Affidavit.
72The Respondent now seeks legal advice, as it did when these issues arose, regarding local labour laws and the appropriate visa requirements. The Respondent does not want to repeat its error and believes that this process will avoid any future breaches. The Respondent also welcomes the Applicant to review or investigate any future projects in Australia[82].
[82] Paragraph 56.23 of the Zhang Affidavit.
Co-operation with authorities
73At all times throughout the investigation, the Respondent co-operated with the Applicant. There were numerous language and interpretation issues throughout the investigation, however, the Respondent, at its expense, engaged translation services to assist it with understanding the many requests for information from the Applicant.
Specific deterrence
74The Respondent has initiated a policy of obtaining legal advice to ensure it is compliant with the relevant laws in the country in which it conducts projects. This was initiated as a direct response to the Applicant’s investigation and these proceedings. Further, the Respondent has demonstrated compliance for the remainder of the Project (from 5 March 2010 onwards). In the circumstances, specific deterrence is not warranted in this case.
General deterrence
75As the Respondent paid wages in excess of the minimum entitlements, its breach is of a technical nature. Accordingly, whilst some general deterrence may be warranted, it should be confined to the technical nature of the breach. The Respondent has already suffered considerable damage and expense resulting from the Applicant’s media releases in this matter and in seeking legal and translation services to rectify the breach[83].
76NB: This paragraph has been deleted as it relies on evidence that is inadmissible pursuant to s.131 of the Evidence Act 1995 (Cth).
Grouping of contraventions
77The Respondent agrees with paragraph 82 of the Applicant’s Submissions.
Totality principle and “instinctive systhesis” test
78The Respondent agrees with paragraph 83 of the Applicant’s Submissions.
Conclusions and recommendations
[83] Paragraph 58 of the Zhang Affidavit.
79In the circumstances, the Respondent denies that a pecuniary penalty should be ordered due to the technical nature of the breach[84]. In the alternative, if a penalty is to be imposed, it should be a low-range penalty.
[84] LHMU v Broadlex Cleaning Australia Pty Ltd [1997] IRCA 296, Victoria University of Technology v AEU [1999] FCA 1065.
80The Respondent has no objection to paragraph 85 of the Applicant’s Submission.”
The applicant provided submissions in reply on the question of penalty in the following terms:
“Introduction
1.In accordance with paragraph 8 of the Orders of the Court dated 27 August 2012, the Applicant makes these further submissions in reply to the Respondent’s Submissions on Penalty filed on 18 October 2012 (Respondent’s Submissions).
2.In making these submissions, the Applicant relies on material referred to in the Applicant’s original Submissions on Penalty filed on 5 October 2012 and, in addition, on the Affidavit of Megan Anne Louise Carter sworn on 2 November 2012.
3.The Applicant disputes:
(a)the Respondent’s assertion, at paragraphs 32.2 and 61 of the Respondent’s Submissions, that the Applicant’s “refusal” initially to accept the Respondent’s position in relation to the non-existence of any underpayment can be explained by issues of mistranslation;
(b)the admissibility into evidence of paragraph 2 of the Affidavit of Lincoln Knowles Smith dated 18 October 2012 (Smith Affidavit) being the alleged offer referred to at paragraph 76 of the Respondent’s Submissions (Alleged Offer); and
(c)as is apparently contended in paragraphs 75 and 76 of the Respondent’s Submissions, that the costs incurred by the Respondent in the course of the proceedings are a relevant matter in respect of penalty.
“Mistranslation” issues
4.In relation to the matters at paragraph 3 above, the Applicant does not accept the Respondent’s narrative of certain events relating to the Applicant’s investigation, including:
(a)the extent of the translations issues arising the course of the Applicant’s investigation; and
(b)the allegations and implications in paragraph 32.1 of the Respondent’s Submissions regarding the nature of any “advice” given to Mr Zhang in relation to the notice to produce documents and request for interview.
5.The Applicant submits that the only actual evidence of mistranslation occurring in the course of the Applicant’s investigation which is relied on in the Respondent’s Submissions (see paragraph 61) is the assertions of Ms Tam, made during the Applicant’s interview with Mr Toby Zhang Xu and repeated in Mr Zhang’s affidavit, that the translator engaged by the Applicant mistranslated some of Mr Zhang’s remarks. This evidence does not support the contention at paragraph 61 of the Respondent’s Submissions that there were “significant translation issues” or that “translators employed by the Applicant often mistranslated what the employees were in fact saying”.
6.Further, to the extent that any mistranslations occurred during the interview with Mr Zhang (which the Applicant does not admit), any errors were, on the Respondent’s own submissions, corrected immediately.
7.Accordingly, the Applicant submits that there is no basis for the Court to find that there were “significant” translation issues or, indeed, any mistranslation issues that materially impacted on the conduct of the investigation or upon the manner in which these proceedings have been conducted.
8.The Applicant further notes that the translators used by the Applicant were not “employed” by the Applicant but were engaged through an independent, external services provider for the purpose of providing interpreting services as required.[85]
[85] Paragraph 6 of the Affidavit of Megan Anne Louise Carter dated 2 November 2012 (Carter Affidavit).
9.In relation to the assertions, at paragraph 32.1 of the Respondent’s Submissions regarding the notice to produce and Mr Zhang’s participation in an interview, that “Mr Zhang was subsequently advised that it was compulsory”, the Applicant submits that this is incorrect to the extent that:
(a)“it” is intended to refer to both the notice to produce documents and the request for interview referred to in the second sentence of paragraph 32.1; and
(b)the Respondent is asserting or implying that the relevant advice was given by the Applicant.
10.In a letter to the Applicant on 25 February 2010, the Respondent’s solicitor asserted that the Respondent had misunderstood the requirement to comply with the notice to produce issued by the Applicant, in that the Respondent believed that it was voluntary.[86]
[86] Paragraph 40 of the Revised Statement of Agreed Facts dated 14 September 2012.
11.The Notice to Produce served on the Respondent on 27 January 2010 was clear on its face that compliance was compulsory. Conversely, the Offers of Interview made in writing to Mr Zhang on 10 February 2010 and 17 February 2010 were clear on their faces that participation in an interview was voluntary.[87]
[87] Exhibits MC-1, MC-2 and MC-3 and paragraphs 7 to 9 of the Carter Affidavit.
12.To the extent that paragraph 32.1 of the Respondent’s Submissions is intended to assert that Mr Zhang came to believe that participation in an interview with the Applicant was compulsory, this belief:
(a)was unreasonable; and/or
(b)not contributed to in any way by any act or omission of the Applicant.
NB: Paragraphs 13 – 18 have been deleted on the basis that paragraph 76 of the respondent’s submissions has been deleted.
Costs irrelevant to penalty
13.The Applicant submits that the Court should not have regard to the costs incurred by the Respondent as a relevant factor in respect of penalty, in particular by reason of the fact that to do so would:
(a)be inconsistent with section 570 of the Fair Work Act 2009 (Cth) (FW Act) and the clear legislative intention that this jurisdiction be primarily a “no-costs” jurisdiction; and
(b)have a tendency to encourage overly aggressive and protracted litigation, to the detriment of parties generally and the public purse.
14.Pursuant to subsections 570(1) and (2) of the FW Act, a party to proceedings in a court exercising jurisdiction under the FW Act may only be ordered to pay another party’s costs in limited circumstances, including where the party’s unreasonable act or omission caused the other party to incur costs. The threshold set by subsection 570(2) of the FW Act is high, in that the Court’s discretion to award costs should only be exercised in a clear case.[88]
15.The Applicant submits that, to the extent the Respondent considers that it has incurred costs by reason of the Applicant’s unreasonable conduct, the Respondent’s remedy lies in an application for costs pursuant to section 570 of the FW Act. To obtain a discount on penalty by reason of costs incurred would, in the Applicant’s submission, be to circumvent the intention of the legislation that:
[88] Saxena v PPF Asset Management Ltd [2011] FCA 395, at [5]-[6]; Construction, Forestry, Mining and Energy Union and Others v Clark (2008) 170 FCR 574 at [29].
(a)the jurisdiction be primarily a “no-costs” jurisdiction; and
(b)a party may only recover its costs where the high threshold set by section 507(2) has been satisfied.
16.In particular, if the fact that a respondent had incurred a particular level of costs in defending proceedings brought against it was to be regarded as a factor which would diminish the size of a penalty that would otherwise have been imposed on it by the Court in respect of a contravention (established or admitted), the effect would be to detract from the policy which is evident in section 570 of the FW Act.
17.Furthermore, in civil penalty proceedings under the FW Act and its predecessors, the Courts have traditionally rewarded a respondent who demonstrates contrition and co-operation with the regulator by allowing a discount on penalty.[89] The discount is generally available where a respondent’s conduct is “properly to be seen as willingness to facilitate the course of justice”.[90]
18.The Applicant submits that to reduce the penalty because the Respondent claims to have incurred significant legal costs (whether or not such costs can be said to be attributable to any unreasonableness on the part of the Applicant) would be inconsistent with the public policy underlying the Courts’ decisions referred to above. That is, in effect, reductions in penalty on the basis of costs incurred, as sought by the Respondent, would reward aggressive and/or obstructive conduct of proceedings and would not reward respondents who demonstrate contrition and co-operation, for example by entering early pleas.
19.The Applicant is not contending that a respondent to proceedings of this nature is not entitled to vigorously pursue any defence that the respondent reasonably considers is open to it. Rather, the Applicant submits that:
(a)if a respondent elects to do so, that is a matter for the respondent and it is not appropriate for a respondent to rely on the amount of its costs to support a reduction in penalty; and
(b)to actively reward a respondent for doing so would result in perverse outcomes and could result in protracted litigations imposing considerable expense on the public purse in circumstances where the respondent is motivated by a desire to reduce its penalty.
20.For the above reasons, the Applicant submits that any costs incurred by the Respondent should not be a factor to be taken into account in respect of penalty.
21.The Applicant further highlights that the Respondent’s Submissions in relation to costs is supported solely by the Smith Affidavit, which contains only an approximation of the total amount spent by the Respondent. The Respondent has provided no breakdown of its costs or any details as to what, specifically, those costs were attributed and in what proportions. Accordingly, the Applicant submits that the Court is unable to assess to what the costs relate, let alone the reasonableness of the costs, or to determine what discount on penalty would be appropriate, even in the event that the Applicant’s submissions in paragraphs 13 to 20 above are not accepted.”
[89] Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70 (Mornington) (per Stone and Buchanan JJ); Fair Work Ombudsman v W.K.O. Pty Ltd [2012] FCA 1129 at [70]-[71].
[90] Mornington, at 74, (per Stone and Buchanan JJ).
I accept that by reason of subs.557(1) of the Fair Work Act, the contraventions should be taken to constitute a single contravention in that the contraventions were committed solely by the respondent and arose out of a course of conduct by the respondent.
I note that s.12 of the Fair Work Act provides that “penalty unit” has the same meaning as in the Crimes Act 1914 (Cth). Section 4AA of the Crimes Act defines “penalty unit” to be $110.00.
Pursuant to subss.539(2) and 546(2) of the Fair Work Act, the maximum penalty that I can impose on a body corporate for these contraventions is 300 penalty units (or $33,000).
I am assisted by the decision of Mobray FM (as he then was) in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 in which he identified a non-exhaustive list of factors that might potentially be relevant to imposition of penalties under the Fair Work Act. I recognise that the list of factors is only a convenient checklist and does not prescribe or restrict the matters which I consider should be taken into account in exercising my discretion.
Nature and extent of the conduct which led to the contravention
I note and take into account what has been submitted on behalf of the applicant in paragraphs 28 to 35 of its reasons and the responding submission in paragraphs 4 to 12 of the Reply. I also take into account the respondent’s submissions at paragraphs 49 to 52. The mistake that was made by the respondent was that it thought that the remuneration arrangement that it had agreed to with the employees would continue to apply while they worked in Australia and that therefore they did not have to consider the industrial legislation in Australia in so far as it applied to payment of employees. Whilst the question of difficulties with translation and, perhaps, cultural issues may have created some difficulties, I do not believe that translation difficulties provides any proper excuse for not taking steps to become informed about what Australian industrial laws require.
The circumstances in which the conduct took place
I note and take into account what has been submitted on behalf of the applicant in paragraphs 35 to 42 and I also take into account the respondent’s submissions at paragraphs 53 to 60.
The nature and extent of any loss or damage sustained as a result of the contraventions
I take into account the submissions put by the applicant in paragraphs 43 to 45 of their submissions. I also take into account the respondent’s submissions at paragraph 62. In my opinion, this factor carries very little weight in relation to the imposition of a penalty.
Whether there had been similar previous conduct by the respondent
I take into account the submissions put on behalf of the applicant in paragraph 46 of their reasons. I also take into account the respondent’s submissions at paragraph 63. Clearly, this consideration has no application in this case.
Whether the contraventions were properly distinct or arose out of the one course of conduct
I take into account the submissions put on behalf of the applicant in paragraphs 47 and 48 of their reasons. I also take into account the respondent’s submissions at paragraph 64. I propose to deal with this matter on the basis that the contraventions should be treated as comprising a single course of conduct by the respondent and consequently as giving rise to a single contravention of s.323(1) of the Fair Work Act by reason of subs.557(1) of the Fair Work Act.
The size of the business enterprise involved
I take into account the submissions put on behalf of the applicant in paragraphs 49 to 54 of their submissions. I also take into account the respondent’s submissions at paragraphs 66 and 67. No doubt the respondent will take greater are when having their employees working in a jurisdiction other than China.
Whether or not the contraventions were deliberate
I take into account the submissions put on behalf of the applicant in paragraphs 55 to 59 of their submissions. I also take into account the respondent’s submissions at paragraph 65. I note that it is an agreed fact that the respondent did not intentionally contravene Australian workplace laws.
Whether senior management was involved in the contraventions
I take into account the submissions put on behalf of the applicant in paragraph 60 of their submissions. I also take into account the respondent’s submissions at paragraphs 68 and 69. I do not consider this factor to carry much weight in relation to the question of penalty.
Whether the party committing the contravention had exhibited contrition
Whether the party committing the contravention had taken corrective action
Whether the party committing the contravention had co-operated with the enforcement authorities
I take into account the submissions put on behalf of the applicant in paragraphs 61 to 73 of their submissions. I also take into account the respondent’s submissions at paragraphs 70 to 73. Whilst I take into account the fact that the employees did not receive their wage entitlement when they should have, this is tempered by the fact that the employees did not originally have an expectation to receive minimum Australian wage entitlements during the relevant period.
The need to ensure compliance with minimum standards by a provision of an effective means for investigation and enforcement of employment entitlements
I take into account the submissions put on behalf of the applicant in paragraphs 73 and 74 of their submissions. I also take into account the respondent’s submissions at paragraph 68 and 69 of their submissions. It would seem to me to be unlikely that this respondent will again bring their employees to Australia. If they do, I feel confident that they will have systems put in place to ensure they properly comply with Australian industrial laws. The penalty must send a clear message not only to the respondent but also to other businesses or individuals who wish to send employees to Australia to work: they must inform themselves about Australian industrial laws and fully comply.
The need for specific and general deterrence
I take into account the submissions put on the part of the applicant in paragraphs 75 to 81 of their submissions. I also take into account the respondent’s submissions at paragraphs 74 to 76. I have previously mentioned the need to have a penalty that sends a message.
Respondent’s costs
I do not consider the fact that a respondent has incurred costs, even heavy costs, is a matter to take into account in relation to the imposition or quantum of a penalty.
How many contraventions
I am satisfied that the parties are correct in their assessment that, by reason of s.557(1) of the Act, there is only one contravention of the Act. I will proceed on that basis.
Should there be a penalty
The respondent submits that a pecuniary penalty is not appropriate as it was a ‘technical’ breach. I disagree. Many respondents in actions such as this, are in similar circumstances to the present respondent and are not aware of the legal requirement imposed by the Fair Work Act and if they had known, would have complied. I consider that in this case I should impose a penalty.
The respondent agrees with the applicant that, if a penalty is to be imposed, it should be within the range of 35 - 45% of the maximum.
Taking into account all of the matters raised by the parties, I consider that a penalty of 45% is called for. The respondent is to pay a penalty of $14,850.
I make the orders to be found at the beginning of these reasons.
I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of Judge Simpson
Associate:
Date: 29 August 2013
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