Workplace Ombudsman v KSN Engineering Pty Ltd
[2009] FMCA 538
•16 June 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WORKPLACE OMBUDSMAN v KSN ENGINEERING PTY LTD | [2009] FMCA 538 |
| INDUSTRIAL LAW – Penalty – contravention of civil penalty provision – agreed facts – agreed penalty – consideration of factors relevant to penalty where penalty agreed. INDUSTRIAL LAW – Penalty – whether size and financial resources and capacity to pay are factors relevant to determination of quantum of penalty. |
| Fair Work Act 2009 (Cth) Workplace Relations Act 1996 (Cth), ss.182, 719 |
| Carr v CEPU & Anor [2007] FMCA 1526 CFMEU v Austral Bricks (Qld) Pty Ltd (2009) 178 IR 470; [2009] FMCA 143 Finance Sector Union v Commonwealth Bank of Australia (2005) 224 ALR 467; [2005] FCA 1847 Hanssen Pty Ltd v Jones (2009) 179 IR 57; [2009] FCA 192 Jones v Hanssen Pty Ltd [2008] FMCA 291 Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 Lawlor v Personal Hire Pty Ltd (2009) 179 IR 91; [2009] FMCA 228 Mason v Harrington Corporation [2007] FMCA 7 Olsen v Sterling Crown Pty Ltd (2008) 177 IR 337; [2008] FMCA 1392 Workplace Ombudsman v Saya Cleaning Pty Ltd [2009] FMCA 38 |
| Applicant: | WORKPLACE OMBUDSMAN |
| Respondent: | KSN ENGINEERING PTY LTD |
| File Number: | PEG 76 of 2009 |
| Judgment of: | Lucev FM |
| Hearing date: | On the papers |
| Date of Last Submission: | 2 June 2009 |
| Delivered at: | Perth |
| Delivered on: | 16 June 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr T Davies |
| Solicitors for the Applicant: | Blake Dawson |
| Counsel for the Respondent: | Mr S Billing |
| Solicitors for the Respondent: | DLA Phillips Fox |
DECLARATIONS AND ORDERS
DECLARATIONS
The respondent contravened s.182 of the Workplace Relations Act 1996 (Cth) by failing to pay Myeong Bae Choi weekly or fortnightly for ordinary hours of work for the weeks ending:
(a)16 July 2006;
(b)23 July 2006;
(c)30 July 2006;
(d)6 August 2006; and
(e)13 August 2006,
with total underpayments amounting to $3332.98 (gross) or $2797.98 (net).
The respondent contravened s.182 of the Workplace Relations Act 1996 (Cth) by failing to pay Eung Dae Lee weekly or fortnightly for ordinary hours of work for the weeks ending:
(a)2 April 2006; and
(b)9 April 2006,
with total underpayments amounting to $833.25 (gross) or $729.25 (net).
The respondent contravened s.182 of the Workplace Relations Act 1996 (Cth) by failing to pay Gyeong Yeong Choe weekly or fortnightly for ordinary hours of work for the weeks ending:
(a)28 April 2006;
(b)5 May 2006;
(c)12 May 2006; and
(d)19 May 2006,
with total underpayments amounting to $1932.22 (gross) or $1680.22 (net).
ORDERS
A penalty of $10,000 be imposed on the respondent in respect of the above contraventions pursuant to s.719 of the Workplace Relations Act 1996 (Cth).
The respondent pay the penalty to the Commonwealth of Australia within 14 days of judgment.
The funds held in escrow be released for the purposes of paying the penalty.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 76 of 2009
| WORKPLACE OMBUDSMAN |
Applicant
And
| KSN ENGINEERING PTY LTD |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application under the Workplace Relations Act 1996 (Cth).[1] The applicant seeks declarations that the respondent contravened s.182 of the WR Act as a result of underpayments made to its employees, and an order for payment of a penalty of $10,000 for those contraventions under s.719 of the WR Act.
[1] “WR Act”.
Agreed facts
The applicant and respondent have agreed the following facts:
1. The Workplace Ombudsman is a Workplace Inspector by force of s167(1a) of the Workplace Relations Act 1996 (the WR Act).
2. Pursuant to s718 of the WR Act and clause 43 of schedule 8 of the WR Act, the Workplace Ombudsman is able to commence proceedings for penalties under s719 of the WR Act for breaches of applicable provisions of the Australian Fair Pay and Conditions Standard and a Notional Agreement Preserving State Award.
3. In particular, the Workplace Ombudsman is able to commence proceedings in respect of claimed underpayment of wages in breach of the Australian Fair Pay and Conditions Standard and a NAPSA.
4. KSN is a body corporate under the Corporations Act.
5. KSN is capable of being sued in its corporate name.
6. At all times on and from 26 March 2006 KSN has been an employer of employees for the purposes of s6 of the WR Act.
7. At all times on and from 26 March 2006 KSN has employed employees (including welders).
8. As at 26 March 2006 and at all relevant times thereafter, KSN employed Mr Myeong Bae Choi, Mr Eung Dae Lee and Mr Gyeong Yeong Choe (the Employees).
9. The Employees were employed as welders/metal tradesmen.
10. Prior to 27 March 2006, KSN was bound by the Metal Trades (General) Award 1966 (WA) (the Award) in respect of its welders and metal trades employees, including the Employees.
11. Since 27 March 2006 KSN has been bound by a Notional Agreement Preserving a State Award derived from the Metal Trades (General) Award (WA) (an award made under Western Australian industrial laws) pursuant to schedule 8 of the WR Act (the NAPSA).
12. Since 27 March 2006 KSN has been bound by the NAPSA in respect of the Employees.
13. Clause 13 of the NAPSA provides that ordinary hours of work average of 38 per week.
14. By operation of s208 of the WR Act, with effect from 27 March 2006, there was a Preserved Australian Pay and Conditions Scale (APCS) which derived rates of pay (and associated provisions) from the Award.
15. The APCS was a term of the Australian Fair Pay and Conditions Standard for the purposes of s171 and s718 of the WR Act.
16. As a result, with effect from 27 March 2006, KSN was required by s182 of the WR Act to pay the Employees the rate prescribed by the preserved APCS, for the Employees' guaranteed hours of work.
16.1 In relation to Mr Myeong Bae Choi
(a) Myeong Bae Choi was employed by the respondent on a full-time permanent basis from 02.09.05 to 10.08.06.
(b) Myeong Bae Choi was employed as a welder/metal tradesman.
(c) Since 27 March 2006 the terms and conditions of Myeong Bae Choi's employment were governed by the NAPSA and the AFPCS including in respect of pay and classifications.
(d) KSN was required to pay Myeong Bae Choi weekly or fortnightly.
(e) KSN was required to pay, but failed to pay Myeong Bae Choi for his ordinary hours of work for the weeks ending:
(i) 16 July 2006;
(ii) 23 July 2006;
(iii) 30 July 2006;
(iv) 6 August 2006; and
(v) 13 August 2006.
(f) By failing to pay Myeong Bae Choi, KSN contravened the provisions of division 2 of part 7 of the WR Act and the NAPSA as referred to above.
(g) KSN's contraventions give rise to a remedy under part 14, division 2 of the WR Act.
16.2 In relation to Mr Eung Dae Lee
(a) Eung Dae Lee was employed by KSN on a full-time permanent basis from 06.12.05 to a date in or around April 2006.
(b) Eung Dae Lee was employed as a welder/metal tradesman.
(c) Since 27 March 2006 the terms and conditions of Eung Dae Lee's employment were governed by the NAPSA and the AFPCS including in respect of pay and classifications.
(d) KSN was required to pay Eung Dae Lee weekly or fortnightly.
(e) KSN was required to pay, and failed to pay Eung Dae Lee for his ordinary hours of work for the weeks ending:
(i) 2 April 2006; and
(ii) 9 April 2006;
(f) By failing to pay Eung Dae Lee, KSN contravened the provisions of division 2 of part 7 of the WR Act and the NAPSA as referred to above.
(g) KSN’s contraventions give rise to a remedy under part 14, division 2 of the WR Act.
16.3 In relation to Mr Gyeong Yeong Choe
(a) Gyeong Yeong Choe was employed by the respondent on a full-time permanent basis from 30.11.05 to 15.05.06;
(b) Gyeong Yeong Choe was employed as a welder/metal tradesman.
(c) Since 27 March 2006 the terms and conditions of Gyeong Yeong Choe’s employment were governed by the NAPSA and the AFPCS including in respect of pay and classifications.
(d) KSN was required to pay Gyeong Yeong Choe weekly or fortnightly.
(e) KSN was required to pay, and failed to pay Gyeong Yeong Choe for his ordinary hours of work for the weeks ending:
(i) 28 April 2006;
(ii) 5 May 2006;
(iii) 12 May 2006; and
(iv) 19 May 2006;
(f) By failing to pay Gyeong Yeong Choe, KSN contravened the provisions of division 2 of part 7 of the WR Act and the NAPSA as referred to above.
(g) KSN’s contraventions give rise to a remedy under part 14, division 2 of the WR Act.
Other agreed facts
17. The facts and matters referred to in the agreed outline of submissions on penalty filed in these proceedings are also taken to be contained in this statement of agreed facts.
Agreed submissions on penalty
The parties have agreed the following submissions on penalty:
1. The principles for assessing penalty are well known and understood. Relevant considerations (and cases) are indicated in Jones v Hanssen Pty Ltd [2008] FMCA 291.[2]
[2] “Hanssen”.
2. The parties submit that the below considerations are relevant to penalty in the present matter.
3. Bearing in mind the below relevant considerations, the parties submit that a penalty in total of $10,000 is a fair assessment of penalty and respectfully request the Court to consider making an order for penalty of this amount.
Circumstances of the conduct
The Employees
4. Mr Myeong Bae Choi, Mr Eung Dae Lee and Mr Gyeong Yeong Choe (the Employees) are Korean nationals.
5. Each Employee is a Korean national.
6. Each Employee was permitted to live and work in Australia under a "457 Business Long Stay visa" sponsored by KSN.
7. Each Employee spoke little or no English.
8. By virtue of paragraphs 5-7 the Employees were vulnerable employees.
The underpayments
9. There are 5 breaches in relation to Mr Myeong Bae Choi. The total amount that the respondent failed to pay Mr Myeong Bae Choi in accordance with clauses 13 and 16 of the NAPSA alternatively the AFPCS was $3,332.98 (gross); $2,797.98 (net).
10. There are 2 breaches in relation to Mr Eung Dae Lee. The total amount that the respondent failed to pay Mr Eung Dae Lee in accordance with clauses 13 and 16 of the NAPSA alternatively the AFPCS was 833.25 (gross); $729.25 (net).
11. There are 4 breaches in relation to Mr Gyeong Yeong Choe. The total amount that the respondent failed to pay Mr Gyeong Yeong Choe in accordance with clauses 13 and 16 of the NAPSA alternatively the AFPCS was $1,932.22 (gross); $1,680.22 (net).
12. The underpayments the subject of the breaches remained outstanding until 10 August 2007 (ie a little over one year after they fell due).
13. However the amounts were paid by KSN shortly after a letter from the solicitors for the applicant dated 1 August 2007 in relation to the underpayment.
Deliberateness of the conduct
14. There is no evidence that KSN deliberately sought to deprive the employees of their lawful wage entitlements.
Relevant record of civil penalty contraventions
15. There are no prior penalties/contraventions to be taken into account.
16. Proceedings PEG 141 of 2007 were discontinued at the time of the consent hearing in relation to this matter with no orders as to costs.
Deterrence
17. A light handed approach is no longer applicable to civil breaches of industrial law (Carr v CEPU & Anor [2007] FMCA 1526 at [29].[3]
[3] “Carr”.
18. On this occasion the respondent engaged in deliberate conduct, but there is no evidence that it did so knowing it would break the law by doing so.
19. There is no evidence to suggest that a high penalty needs to be awarded to ensure that the respondent does not breach the WR Act again.
20. However the penalty imposed must act as a general deterrent to breaches of the WR Act and to ensure more generally that employers comply with penalty provisions of the WR Act and employment legislation.
21. The penalty should be at a meaningful level to make a potentially offending corporation think that similar conduct in the future is "not worth the prospect of gain" (Merkel J in Finance Sector Union v Commonwealth Bank of Australia [2005] FCA 1847; (2005) 224 ALR 467 at [41]ff). (see also s3(f) of the WR Act).
22. The penalty must show the seriousness with which the Court views such contraventions.
Capacity
23. KSN has the capacity to pay a penalty of $10,000.
Other factors
24. The parties have agreed, as part of an overall settlement of issues, that a penalty of $10,000 is appropriate – and that the agreed penalty falls acceptably within the appropriate range for the conduct in question.
25. The respondent cooperated by reaching an agreed outcome in respect of the application and penalty.
26. The respondent's director, Mr Kyung Sam Na has agreed to attend training with the Workplace Ombudsman in relation to the respondent's obligations under the WR Act and the Fair Work Act.
Consent Declarations and Orders
The parties have consented to the following declarations and orders, and seek their issuance subject to the Court’s approval:
1. A declaration that the respondent contravened s182 of the Workplace Relations Act 1996 (Act) by failing to pay Myeong Bae Choi weekly or fortnightly for ordinary hours of work for the weeks ending:
(a) 16 July 2006;
(b) 23 July 2006;
(c) 30 July 2006;
(d) 6 August 2006; and
(e) 13 August 2006,
with total underpayments amounting to $3332.98 (gross) or $2797.98 (net).
2. A declaration that the respondent contravened s182 of the Act by failing to pay Eung Dae Lee weekly or fortnightly for ordinary hours of work for the weeks ending:
(a) 2 April 2006; and
(b) 9 April 2006;
with total underpayments amounting to $833.25 (gross) or $729.25 (net).
3. A declaration that the respondent contravened s182 of the Act by failing to pay Gyeong Yeong Choe weekly or fortnightly for ordinary hours of work for the weeks ending:
(a) 28 April 2006;
(b) 5 May 2006;
(c) 12 May 2006; and
(d) 19 May 2006;
with total underpayment amounting to $1932.22 (gross) or $1680.22 (net).
4. A penalty of $10,000 be imposed on the respondent in respect of the above contraventions pursuant to section 719 of the Act.
5. The respondent pay the penalty to the Commonwealth of Australia within 14 days of judgment.
6. The funds held in escrow are released for the purposes of paying the penalty.
Consideration - general
The ordinary principles[4] with respect to assessment of penalty are set out in Hanssen, and a number of other cases in this Court and the Federal Court.[5]
[4] Hanssen at para.6 per Lucev FM. Hanssen was appealed, and the relevant penalty reduced on appeal from $173,250 to $85,000: Hanssen Pty Ltd v Jones (2009) 179 IR 57; [2009] FCA 192 (“Hanssen Appeal”), because this Court placed too much emphasis on the mere fact that there had been exploitation of vulnerable employees rather than articulating the actual detriment, which in the circumstances, was no greater than, and no different to that of, a non-vulnerable employee: Hanssen Appeal IR at 68 and 74 per Siopis J; FCA at paras.61 and 99 per Siopis J. The ordinary principles used to assess penalty were not however criticised in Hanssen Appeal.
[5] See, eg, Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080; Mason v Harrington Corporation [2007] FMCA 7; Carr; Olsen v Sterling Crown Pty Ltd (2008) 177 IR 337; [2008] FMCA 1392 (“Sterling Crown”); CFMEU v Austral Bricks (Qld) Pty Ltd (2009) 178 IR 470; [2009] FMCA 143.
The agreed facts and agreed submissions on penalty set out above reflect the principles to be applied generally in the assessment of penalty. Further, they set out factual material relevant to the application of those principles.
In the context of the ordinary principles with respect to assessment of penalty, the Court must in this case consider whether the agreed penalty is appropriate. That consideration involves a further set of principles, succinctly set out in Carr:
6.In dealing with proposed agreed penalties the courts have developed certain principles for guidance. They include:
a) that the court bears ultimate responsibility for penalty, is not bound by the parties’ agreement, and must consider for itself what constitutes an appropriate penalty;
b)determining penalty quantum is not an exact science, and within a permissible range a particular figure is not necessarily more appropriate than another figure;
c)promoting settlement of litigation (particularly lengthy litigation) is in the public interest, and where the parties agree on facts and penalty, they may present a statement of agreed facts, including a view as to the effect of those facts, and submissions on penalty;
d)the view of the regulatory body is relevant, particularly where the view concerns matters within the regulator’s expertise, but not determinative of penalty;
e)in determining appropriate penalty the court will examine all the circumstances, including an agreed statement of facts, and, if appropriate, may act on that statement; and
f)a jointly proposed penalty will not be rejected simply because the court might have chosen a different figure: it is sufficient if the jointly proposed penalty is “within the permissible range” or “broadly speaking” within that range.[6]
[6] Carr at para.6 per Lucev FM (footnotes omitted).
The Court, having considered the agreed facts on penalty, the agreed submissions on penalty, the principles with respect to assessment of penalty and the principles on whether the agreed penalty is appropriate, makes the following observations:
a)the nature of the conduct, namely the underpayment of employees, affected a group of vulnerable employees, but the conduct itself occurred only for a matter of weeks;
b)the effect of the conduct was to underpay employees, which is a serious matter, but again this only occurred for a matter of weeks;
c)whilst the conduct was deliberate, it was also unknowing in relation to the relevant legal requirement to pay;
d)there is no particular evidence of involvement of senior management, but the Court notes that a director of the respondent has agreed to attend training with the applicant in relation to obligations under the WR Act and the Fair Work Act 2009 (Cth);
e)there is no prior record of civil penalty contravention by the respondent;
f)there is evidence of co-operation by the respondent, including:
i)payment of the underpayments shortly after a letter from the applicant’s solicitors in relation to the underpayments;
ii)co-operation with the applicant in relation to reaching agreement as to the outcome of the application and penalty; and
iii)an agreement to undertake training in the manner set out above;
g)there is contrition by the respondent, at least to the extent evidenced by the matters referred to in sub-paragraph f) above;
h)this is not a case where specific deterrence looms large, and the agreed penalty is appropriate to achieve the object of general deterrence; and
i)the respondent has the capacity to pay the agreed penalty.
Consideration – capacity to pay
Whether capacity to pay is a relevant consideration in determining penalty might be said to be controversial.
In Carr the Court as presently constituted observed that there “is an established principle in setting penalties for both individuals and corporations that regard is had to their financial position, and more particularly their capacity to pay.”[7] In Sterling Crown the Court, again as presently constituted, after an extensive review of the relevant authorities came to the view that it “appears that the size and financial resources of a contravener are factors to be considered, and the impact of those factors upon the setting of penalty is in each case a matter for consideration of the particular circumstances of the size and financial resources of the contravener, plus the other factors which are relevant”.[8]
[7] Carr at para.27 per Lucev FM.
[8] Sterling Crown IR at 356 per Lucev FM; FMCA at para.76 per Lucev FM (with the detailed consideration of the matter appearing at IR 352-356 per Lucev FM; FMCA at paras.58-76 per Lucev FM).
In Lawlor v Personal Hire Pty Ltd[9] the headnote indicates that the Court found that the “financial health of a respondent corporation is not a relevant consideration in determining the quantum of penalty”[10] and that Workplace Ombudsman v Saya Cleaning Pty Ltd[11] was applied. However, no such conclusion was actually reached by the Court in Lawlor. The Court’s judgment in Lawlor simply sets out the relevant passages from Saya Cleaning, which quote passages from other judgments, without expressing a concluded view as to their effect.[12] Indeed, and arguably contrary to the effect of the headnote, the Court in Lawlor took into account, when imposing penalties on each of the first and second respondents, that the first respondent was “a very small entity … effectively a ‘one man company’” and that “any penalty ordered to be paid by the first [company] respondent is in effect going to have to be paid by the second [individual] respondent”.[13]
[9] (2009) 179 IR 91; [2009] FMCA 228 (“Lawlor”).
[10] Lawlor IR at 91, headnote two.
[11] [2009] FMCA 38 (“Saya Cleaning”).
[12] Lawlor IR at 99 per Wilson FM; FMCA at para.28 per Wilson FM, citing Saya Cleaning at paras.26-30 per Simpson FM.
[13] Lawlor IR at 100 per Wilson FM; FMCA at para.33 per Wilson FM.
In Saya Cleaning the Court did not express a view as to whether or not the size and financial resources of a contravener ought to affect penalty. It merely quoted from various judgments and said that the Court would take into account what was said in those judgments in imposing penalties.[14] The Court in Saya Cleaning and Lawlor did not refer to the Court’s discussion of the issue, and extensive review and rationalisation of the relevant authorities (including authorities quoted from in Saya Cleaning), in Sterling Crown.
[14] Saya Cleaning at para.31 per Simpson FM.
In the circumstances, neither Lawlor nor Saya Cleaning can be considered authority for the proposition that the size and financial resources of a contravener, or its capacity to pay, can be ignored, or not considered, when this Court determines penalty. It is the view of the Court, as presently constituted, that, for the reasons extensively set out in Sterling Crown, a contravener’s size and financial resources, including their capacity to pay, is a relevant factor in determining the quantum of any penalty.
Consideration – conclusion re penalty
The Court is therefore satisfied, having considered all of these relevant matters for itself, that the agreed penalty of $10,000 for the 11 identified contraventions is appropriate and at a level which, even if arguably lower than the Court might have imposed, still falls broadly within the permissible range of penalty for the contraventions concerned. The penalty to be imposed accords with the statutory purposes of the WR Act, and the requirements of the totality principle, so far as that principle applies in the case of an agreed penalty.
Conclusion, declarations and orders
The Court has concluded that the agreed penalty is appropriate, for reasons set out above. In the circumstances, declarations and orders as set out above, and consented to by the parties, will issue.
I certify that the preceding fifteen (15) paragraphs are a true copy of the reasons for judgment of Lucev FM
Associate: S. Gough
Date: 16 June 2009
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