Inspector Hourigan v Falanga Enterprises Pty Ltd
[2009] FMCA 1001
•30 October 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| INSPECTOR HOURIGAN v FALANGA ENTERPRISES PTY LTD & ANOR | [2009] FMCA 1001 |
| INDUSTRIAL LAW – Application for imposition of penalties – underpayment of employee – civil penalty hearing. |
| Corporations Act 2001 (Cth) s.471B Workplace Relations Act 1996, ss.4(1), 5, 178, 181,182, 185, 208, 719, 722, 728 & Schedule 8 |
| Mason v Harrington [2007] FMCA 7 Salandra v Risborg Services Pty Ltd & Ors [2008] FMCA 76 |
| Applicant: | INSPECTOR SAMANTHA HOURIGAN |
| First Respondent: | FALANGA ENTERPRISES PTY LTD (IN LIQUIDATION) |
| Second Respondent: | ANTHONY PAUL FALANGA |
| File Number: | ADG 292 of 2007 |
| Judgment of: | Simpson FM |
| Hearing date: | 14 March 2008 |
| Date of Last Submission: | 3 March 2009 |
| Delivered at: | Adelaide |
| Delivered on: | 30 October 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr R. Manuel and later Mr N. Ey |
| Solicitors for the Applicant: | Finlaysons and later Piper Alderman |
| The First Respondent: | No appearance |
| The Second Respondent: | Self-represented |
ORDERS
The first respondent pay the Commonwealth a penalty pursuant to section 719(1) of the Workplace Relations Act 1996 (Cth) (“the Act”) of TWO THOUSAND FIVE HUNDRED DOLLARS ($2,500.00) for contravention of section 185(2) of the Act.
The first respondent pay the Commonwealth a penalty pursuant to section 719(1) of the Act of TWO THOUSAND FIVE HUNDRED DOLLARS ($2,500.00) for contravention of Part 3 of Schedule 8 of the Act.
The second respondent pay the Commonwealth a penalty of FIVE HUNDRED DOLLARS ($500.00) pursuant to section 719(1) of the Act on account of his involvement within the meaning of section 728 of the Act in the first respondent’s contravention of the Act as referred to in paragraph 1 of these Orders.
The second respondent pay the Commonwealth a penalty of FIVE HUNDRED DOLLARS ($500.00) pursuant to section 719(1) of the Act on account of his involvement within the meaning of section 728 of the Act in the first respondent’s contravention of Part 3 of Schedule 8 of the Act as referred to in paragraph 2 of these orders.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADG 292 of 2007
| INSPECTOR SAMANTHA HOURIGAN |
Applicant
And
| FALANGA ENTERPRISES PTY LTD (IN LIQUIDATION) |
First Respondent
| ANTHONY PAUL FALANGA |
Second Respondent
REASONS FOR JUDGMENT
Introduction
The applicant is a Workplace Inspector appointed by and subject to the direction of the Office of the Workplace Ombudsman. The first respondent is a company (now in liquidation) that carried on a business as an unlicensed café trading under the name “The Highgate Mall Café” at Fullarton Road, Highgate. The second respondent is the first respondent’s sole director and secretary.
The Amended Application filed on 9 January 2009 sought the following relief:
1. A pecuniary penalty against the first respondent pursuant to section 719(1) of the Workplace Relations Act 1996 (Cth) (“the Act”) for contravention of section 185(2) of the Act in relation to the underpayment of wages to Danielle Pelkas under a Notional Agreement Preserving the Delicatessen’s Industrial and Commercial Canteens, Unlicensed Cafes and Restaurants etc Award (“the NAPSA”).
2. A pecuniary penalty against the first respondent pursuant to section 719(1) of the Act for contravention of Part 3 of the Schedule 8 of the Act by failing to engage Danielle Pelkas for the minimum engagement period prescribed by clause 4.3.5 of the NAPSA.
3. Orders pursuant to sections 719(6) and 722(1) of the Act that the first respondent pay to Danielle Pelkas the sum of $629.31 plus interest.
4. A pecuniary penalty against the second respondent pursuant to section 728 (sic) of the Act on account of his involvement in the first respondent’s contravention of section 719(1) (sic) of the Act referred to in paragraph 1 above.
5. A pecuniary penalty against the second respondent pursuant to section 728 (sic) of the Act on account of his involvement in the first respondent’s contravention of section 719(1) (sic) of the Act referred to in paragraph 2 above.
Since these proceedings have been commenced the second respondent has paid an amount to Ms Pelkas with the result that the applicant no longer seeks the order referred to in (3) above.
The first respondent is a company incorporated on 19 November 2004 and placed in liquidation on 16 October 2007. On 21 December 2007 an order was made in the Supreme Court of South Australia giving leave pursuant to s.471B of the Corporations Act 2001 (Cth) for the applicant to proceed with her claim against the first respondent in these proceedings.
Material relied on
The applicant has relied upon the following material:
a)Amended Application – General Federal Law filed on 9 January 2009;
b)Affidavit of the applicant, Samantha Hourigan, Workplace Inspector filed on 12 October 2007;
c)Document titled “Further Statement of Agreed Matters” filed on 4 March 2008;
d)Document titled “Penalty Submissions of Workplace Ombudsman” filed on 14 March 2008
e)Further affidavit of the applicant, Samantha Hourigan, Workplace Inspector filed on 16 January 2009;
f)Document titled “Statement of Agreed Matters” filed on 16 January 2009;
g)Document titled “Further Penalty Submissions of the Applicant” filed on 16 January 2009;
h)Document titled “Statement of Agreed Matters” filed on 3 March 2009; and
i)Document titled “Further Submissions of the Applicant” which is unfiled.
The Court has been informed by Counsel for the applicant that the liquidator of the first respondent has indicated that he does not wish to be legally represented at this penalty hearing. No material has therefore been put before the Court nor submissions made on behalf of the first respondent.
The second respondent has at all times appeared without legal representation. He relies upon an affidavit of his filed on 7 December 2007 and has put oral submissions.
I have taken into account all of this material as well as the detailed submissions, both written and oral, that have been put by Counsel for the applicant and by the second respondent in person.
Where in these reasons I make statements of fact they are findings of fact made on the balance of probabilities on the evidence provided on the basis of agreement between the parties.
Background
The second respondent is a 27 year old man who had been working in the hospitality industry since he was 13 years of age. Whilst still at school he worked for McDonalds and later for a hotel.
In 2002 the second respondent ran his own business for the first time when he operated a small snack bar. It had no employees other than himself and his family members. At some stage he sold that business and purchased what he described as a “function centre at Port Adelaide” which only opened for business on Saturdays. It is not clear on the material before me whether the second respondent had any paid employees in relation to this business.
On and from 19 November 2004 the second respondent was used by the first respondent as a vehicle to operate his café business “The Highgate Mall Café” (“the business”).
On 15 August 2006 the first respondent employed Ms Danielle Pelkas (“Ms Pelkas”) on a casual basis as a cleaner/shop assistant. She was paid on a fortnightly basis.
The second respondent says that he became highly dissatisfied with Ms Pelkas’ work and terminated her employment on 3 November 2006. Soon after this he received a letter from Ms Pelkas saying that she felt that she had been underpaid and had lodged a complaint to this effect with the Workplace Ombudsman. The second respondent says that he attempted to contact Ms Pelkas but was unable to do so. Soon afterwards he was contacted by a representative of the Workplace Ombudsman.
Immediately before 27 March 2006 (which was the commencement date of the legislative reform as defined in s.4(1) of the Workplace Relations Act1996 (Cth) (“the Act”) commonly known as the “Work Choices” amendments) the terms and conditions of Ms Pelkas’ employment by the first respondent were determined, either in whole or in part, under a State award (as defined in s.4(1) of the Act) namely the Delicatessens, Canteens, Unlicensed Cafés and Restaurants etc Award made by the Industrial Relations Commission of South Australia (“the State Award”). They were not determined under a State employment agreement (as defined in s.4(1) of the Act).
As a result of the matters referred to in paragraph 14 above, and pursuant to cl.31 of Sch.8 of the Act, a notional agreement preserving State awards (“the NAPSA”) was taken to come into operation on 27 March 2006 in respect of the first respondent’s business.
Pursuant to cl.32 of Sch.8 of the Act, the first respondent as the employer was bound by the NAPSA because immediately before 27 March 2006 the first respondent was bound by the State Award.
Pursuant to cl.33(2) of Sch.8 of the Act, the employment of Ms Pelkas by the first respondent was subject to the NAPSA because she continued to be employed in the first respondent’s business after 27 March 2006. Under the terms of the State Award her employment would have been subject to that award and she was not bound by a preserved State agreement (as defined in cl.1 of Sch.8 of the Act).
Pursuant to cl.34(1) of Sch.8 of the Act, the terms of the NAPSA to which Ms Pelkas’ employment was subject included the State Award, cl.4.3.5, of which provided that the minimum period of any engagement would be 3 hours.
Ms Pelkas’ pay entitlements were governed by Div.2 of Pt.7 of the Act. The State Award was a pre-reform wage instrument (as defined in s.178 of the Act) and contained rate provisions (as defined in s.181 of the Act). Consequently, pursuant to s.208(1) of the Act, there was taken to be a preserved Australian Pay and Classification Scale (“the Preserved APCS”) that included the rate provisions referred to and the casual loading provisions of the State Award.
Ms Pelkas’ employment was covered by the Preserved APCS by virtue of the coverage provisions (as defined in s.178 of the Act) of the Preserved APCS.
Pursuant to s.182(1) of the Act and the rate provisions of the State Award, the first respondent was required to pay Ms Pelkas a basis periodic rate of pay (as defined in s.178 of the Act) for each hour that she worked that was at least equal to the basic periodic rate of pay that was payable to her under the Preserved APCS. In the case of Ms Pelkas, that rate was $13.29 gross per hour.
Pursuant to s.185 of the Act and the casual loading provisions of the State Award, the first respondent was required to pay Ms Pelkas, in addition to the $13.29 per hour, a casual loading that was at least equal to the guaranteed casual loading percentage of her basis rate of $13.29 per hour. Pursuant to Item 1 of s.185(3) of the Act the guaranteed casual loading percentage payable to Ms Pelkas was 20 percent.
Accordingly, the first respondent was required to pay Ms Pelkas for each hour worked at the rate of $15.95 gross, being 120 percent of $13.29 gross.
At the direction of the second respondent the first respondent only paid Ms Pelkas at a flat rate of $14.50 gross per hour for all hours worked. The first respondent therefore underpaid Ms Pelkas by $1.45 gross per hour for all hours worked. As a consequence, the first respondent contravened s.185(2) by failing to pay the full amount of the casual loading to which Ms Pelkas was entitled.
Ms Pelkas worked a total of 142.5 hours throughout her employment with the first respondent. The total underpayment by the first respondent to Ms Pelkas concerning the failure to pay the full amount of the guaranteed casual loading was therefore $206.63 gross, being 142.5 hours at $1.45 gross per hour.
As stated above, Ms Pelkas was entitled to a minimum engagement per shift of three hours pursuant to cl.4.3.5 of the NAPSA. The first respondent engaged Ms Pelkas for only 2.5 hours per engagement on 53 occasions during her employment. On each such occasion, she was paid for only 2.5 hours work at the rate of $14.50 gross per hour. The first respondent, at the direction of the second respondent, failed to provide Ms Pelkas her minimum entitlements of engagement in contravention of c.4.3.5 of the NAPSA and Pt.3 of Sch.8 of the Act. The total underpayment by the first respondent to Ms Pelkas concerning the minimum period of engagement is $422.68 gross.
The total amount of the underpayment of Ms Pelkas by the first respondent as a result of the above-mentioned contraventions of the Act was $629.31 gross.
The second respondent admits that he was a person “involved in” the above-mentioned contraventions of the Act by the first respondent.
The second respondent determined the times at which Ms Pelkas worked for the first respondent during the course of her employment. The second respondent knew that the first respondent only paid Ms Pelkas at the rate of $14.50 per hour throughout the course of her employment and knew that the first respondent engaged Ms Pelkas for less than three hours per engagement on 53 occasions during the course of her employment.
There were 12 occasions when the first respondent contravened s.185(2) by not paying Ms Pelkas the 20 percent casual loading. There were 53 occasions when there were breaches of Part 3 of Schedule 8. These breaches are to be treated as one contravention of each provision as they were sets of breaches of each provision as a result of a course of conduct.
The maximum penalty for the first respondent is $33,000 in relation to each breach, a total of $66,000. The maximum penalty for the second respondent is $6,600 in relation to each breach, a total of $13,200.
Assessing penalty
In assessing penalty I take into account all the usual factors that have been identified in cases such as Mason v Harrington [2007] FMCA 7 and Salandra v Risborg Services Pty Ltd & Ors [2008] FMCA 76. These factors are:
a)The nature and extent of the conduct which led to the breaches;
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 breaches;
d)Whether there has been similar previous conduct by the party;
e)Whether the breaches were properly distinct or arose out of the one course of conduct;
f)The size of the business enterprise involved;
g)Whether or not the breaches were deliberate;
h)Whether senior management was involved in the breaches;
i)Whether the party committing the breach had exhibited contrition for the breach firstly, by taking action to make reparation for any loss resulting from the breach whether or not there was a legal obligation to do so and second, in any other manner;
j)Whether the party committing the breach has taken corrective action to ensure further breaches to not occur;
k)Whether the party committing the breach has cooperated 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;
m)The need for specific and general deterrence;
n)If the party has admitted the breaches of the applicable provisions – that fact; and
o)If the party is an individual, the character, antecedents, age, means and physical or mental condition of the party.
The conduct involved only one employee who was only employed by the first respondent for less than 12 weeks. I accept that the second respondent was genuinely unaware that Ms Pelkas was being underpaid. There has been no similar previous conduct by him or his company. The breaches can properly be considered to have arisen out of a course of conduct by the respondents.
The second respondent is clearly contrite. I am confident that he is unlikely to again be involved in an employer’s breach of such provisions. It is very much to the second respondent’s credit that he has voluntarily made good the loss (including interest) that Ms Pelkas has suffered as a result of the first respondent going into liquidation.
In determining penalty I recognise the need for specific and general deterrence. In this case for the reasons mentioned earlier, the need for specific deterrence is not great. It is necessary however for all people who embark on a career in business, including the young and inexperienced such as the second respondent in this case, to realise that they must take all appropriate steps to become properly informed about their legal obligations to their employees. The penalties that I propose to impose will reflect this fact.
The size of the business as well as the extent of the loss initially sustained as a result of the breaches puts this as the lower end of the range for penalty.
The second respondent is entitled to an appropriate reduction in penalty as a result of admitting the breaches of the applicable provisions.
Conclusion
Taking all relevant matters into account, I propose to impose penalties in the sum of $2,500 for each of the breaches by the first respondent and, in the case of the second respondent two penalties each in the sum of $500.
I make the orders to be found at the beginning of these reasons.
I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of Simpson FM
Associate: J. Semler
Date: 30 October 2009
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