WESTERN AUSTRALIAN INDUSTRIAL MAGISTRATES COURT

CITATION : 2013 WAIRC 01004

DELIVERED : WEDNESDAY, 6 november 2013

FILE NO. : M 43 OF 2011

CLAIMANT

AND

Vincenzo Salvatore Todaro

RESPONDENT

CatchWords : 

Legislation : Fair Work Act 2009

  Workplace Relations Act 1996

  Fair Work Transitional Provisions and Consequential Amendments Act 2009

Instrument : Restaurant, Tearoom and Catering Workers’ Award

  Notional Agreement Preserving the State Award     

Result : Orders issued, penalties imposed

Representation:

Applicant : Mr A.J. Power of Counsel and with him Ms K. Thomson

Respondent : No appearance

Case(s) referred to:  Lei and Ng v VST Pty Ltd [2010] WAIRC 897

Fair Work Ombudsman v Bento Kings Meadows Pty Ltd [2013] FCCA 997

     Fair Work Ombudsman v Todaro [2013] WAIRC 00831

REASONS FOR DECISION

(Given extemporaneously at the conclusion of the hearing, extracted from the transcript of proceedings and edited by her Honour)

1         Having read the Claimant’s submissions on penalty, in addition to the supporting affidavits by Keelyann Thompson, sworn on 18 October 2013 and on 4 November 2013, I have given consideration to the penalty that is to be applied in the Respondent’s case. I start by making reference to the decision of Fair Work Ombudsman v Bento Kings Meadows Proprietary Limited [2013] FCCA 997 (“Bento Kings Meadows”).

2         As I have already indicated to the Claimant from my readings of its submissions which are fulsome, Bento Kings Meadows [supra] is the most recent relevant case and it is particularly relevant because it involves similar contraventions in the same industry as this court is dealing with in respect of the matter before it. And I think it’s useful just to read from paragraph 1 [of Bento Kings Meadows [supra]]:

“In many cases before this court over the last number of years it has been repeatedly identified that there is a significant risk of underpayments and breaches of workplace legislation in the restaurant and hospitality industry where vulnerable employees such as foreign nationals on visas are employed.  This case is yet another example that the risk continues to exist.” 

3         In my view the comments made by his Honour Judge O’Sullivan in Bento Kings Meadows are apposite to the situation that this court finds itself with respect to Mr Ng and Ms Lei.  The difference being that Mr Ng and Ms Lei may or may not be foreign nationals on visas or may be permanent residents, although that is not really the point.

4         The point is, and I will expand upon this shortly, that they were vulnerable employees and, even if they are not people with English as their second language, the nature of the hospitality industry often involves vulnerable people, because they may be less skilled workers, having had less formal education and certainly the pay scales involved demonstrate that they are perhaps not as well paid as in other industries.

5         And for all of those reasons that often puts people in the hospitality industry in a lesser bargaining position to the people who employ them.  I also note that in Bento Kings Meadows it was of significance that the Respondent, Bento Kings Meadows Pty Ltd, cooperated, made admissions, accepted their wrongdoing to a certain extent, expressed regret and had taken steps to comply with its obligations.  In my view, this is significant because in this particular matter, the Respondent, Mr Todaro, has done none of that.

6         I do not consider that I need to traverse the facts and circumstances in this case with any degree of specificity on the basis that the circumstances of the contraventions are set out in the decision by my colleague, Industrial Magistrate Boon, in the decision of Lei and Ng v VST Pty Ltd [2010] WAIRC 897 (“the 2010 decision”), and the findings made by Industrial Magistrate Boon are not in dispute and nothing displaces those findings.

7         Furthermore, the principles upon which civil penalties are to be applied by the court are set out fully in the Claimant’s submissions on penalty and, in addition, my review of Bento Kings Meadows demonstrates that those submissions are consistent with the principles applied in that case and no doubt other cases and I adopt those principles.  I do not intend to repeat them.  In my view, it is unnecessary. Those principles are not in contention and I have nothing before me that demonstrates that I ought not to adopt them fully as applicable to how civil penalties are to be decided in this particular case. 

8         Mr Todaro was the sole director and secretary of VST Pty Ltd (“VST”) who was found by Industrial Magistrate Boon, in the 2010 decision, to be the employer of Kenny Meng Wei Ng and Ning Wei Lei. 

9         As a result of the determination in the court in Fair Work Ombudsman v Todaro [2013] WAIRC 00831, the Respondent, Mr Todaro, was found to be involved in VST’s contraventions of the Workplace Relations Act 1996 (“WR Act”) and the Restaurant Tearoom Catering Workers Award 1979, as it continued to operate as a Notional Agreement Preserving the State Award, pursuant to section 728 of the WR Act.  The Fair Work Ombudsman now seeks orders pursuant to section 719 of the WR Act with respect to the contraventions set out in the findings made on 16 September 2013. 

10      As indicated in the Claimant’s submissions, the maximum penalty for a breach of section 719(1) of the WR Act is 60 penalty units and a penalty unit is $110.00, pursuant to section 4(1) of the WR Act when read with section 4AA of the Crimes Act 1914 (Cth) taking into account when the contraventions occurred.  The maximum penalty that may be imposed is $6,600.00 with respect to each contravention.

11      As I have indicated, I have read, and refer to, annexure A to the Claimant’s submissions with respect to the contravened provisions as found by the court and I adopt both annexure A and annexure B, as they set out how the court may go about its task of imposing a penalty.  In annexure A, the Claimant also identifies the number of contraventions it says are applicable for the purpose of calculating the appropriate penalty, having regard to section 719(2) and (4) of the WR Act. 

12      The net effect of applying these provisions and also the applicable principles are that there are eight contraventions to which a penalty can be applied.  I see no reason why the court would depart from the Claimant’s submissions in respect to the applicable number of contraventions and I adopt its submissions in that regard.  Therefore, the total maximum penalty proposed by the Fair Work Ombudsman, having regard to the maximum penalty for each contravention, is $52,800.00, and my own computations agree with that figure and I see no reason to depart from it.

13      I note in the last column of annexure B that the Fair Work Ombudsman has set out the proposed penalty amounts that it says is applicable having regard to the nature of the contravention, amongst other things, and submits that the nature of the contraventions are in the mid to high range and their proposed penalties amounts reflects that.  I note that the amount is between $4,620.00 and $5,280.00 per contravention with a proposed total penalty amount of $36,960.00 to $42,240.00. 

14      Having regard to the contraventions themselves, the following comments are relevant when considering the appropriate penalty to be applied. 

15      In relation to Ms Lei and Mr Ng the following is relevant.  Industrial Magistrate Boon found that Ms Lei and Mr Ng were employed by VST.  Mr Ng was employed initially as a casual employee from 29 December 2004 to 8 March 2005 and a full time employee thereafter until 4 December 2007.  Ms Lei was employed from 29 May 2006 to 17 November 2007.  During the entirety of this period, Mr Ng and Ms Lei were both underpaid entitlements and/or not paid entitlements, including entitlements in respect of wages, superannuation and annual leave. 

16      These entitlements are properly categorised as minimum conditions of employment.  That is, they are the minimums that an employer would be required to do in order to comply with its employment obligations with respect to its employees.  That is, to pay its employees at the correct amount, to pay superannuation at the correct amount or at all and to pay annual leave entitlements at the correct amount or at all. 

17      Ms Lei and Mr Ng are properly categorised as vulnerable employees in that English is their second language and their understanding of their entitlements was, for certain periods of time, rudimentary.  It was only when Mr Ng did his own research into the entitlements did he draw that to the attention of Mr Todaro personally, and I accept that he did so.  In short, their bargaining power was poor. 

18      Mr Todaro was the sole director and secretary of VST.

19      In my view, Mr Todaro was actively involved in running the restaurant and, in that respect, I consider his actions after the 2010 decision was delivered to be telling.  That is, approximately seven days after the 2010 decision, whereby it was found that VST had contravened the WR Act, VCR Pty Ltd (“VCR”), a company that Mr Todaro is the sole director, shareholder and secretary of, took over the operations of the same restaurant albeit that there was a minor name change.

20      In that regard, the sole director and secretary of one company effectively handed over the reins to the same sole director and secretary of a different company to take up the same business is demonstrative of somebody who has more than just a passing interest in a business, but is the actions of someone who is actively involved.  Further, based on the timeframes considered in the 2010 decision and during the course of the decision in this particular matter, in my view, Mr Todaro was involved and has been involved in the hospitality industry for significant periods of time, and I would find it staggering that he would not be aware of his obligations with respect to the payment of entitlements to employees.

21      Furthermore, approximately seven to 10 days after the 2010 decision, VST ceased to trade and Mr Todaro during the course of these proceedings admitted that VST had no assets to pay the amounts determined in the 2010 decision.  There is an irresistible inference to be drawn that the purpose of VST ceasing to trade and having VCR take over the operation of the same restaurant was to escape the obligation to pay the entitlements owed to Mr Ng and Ms Lei.  Mr Todaro, by reason of the position he held in both companies, must have known what he was doing.

22      At all times Mr Todaro must have known or at least had a careless disregard for his actions.  He was the sole director and secretary of VST and VCR.  He initially denied knowing Mr Ng and Ms Lei.  He has been involved in the restaurant industry for some time and the contraventions occurred over a lengthy period of time with respect to significant aspects of the employees’ entitlements.  In that regard the contraventions by Mr Todaro, as he has been found to be involved in the contraventions by VST, can only be considered serious and at the upper end of the spectrum in terms of the deliberate nature of them and their ongoing detriment to people who are properly categorised as vulnerable employees.

23      In terms of general and specific deterrence, I have already referred to Bento Kings Meadows and, in my view, the factors relevant to general deterrence are that a penalty in this particular case needs to have some impact upon other like‑minded people involved in the hospitality industry.  Furthermore, general deterrence needs to reflect that this was not a situation whereby an employer had made an honest mistake about their obligations.  This involved the failure to pay minimum terms and conditions of Mr Ng’s and Ms Lei’s employment.

24      Furthermore, a substantial penalty needs to be applied to recognise the seriousness and the deliberateness of the breach. In terms of the size of the restaurant I have no information before me which gives me any indication as to the size of the business, but in any event my review of the submissions and of Bento Kings Meadows leads me to conclude that in some respects it matters not the size of Mr Todaro’s business. 

25      The fact is that he through his company did employ people.  He took advantage of them by reason of his involvement in those companies and the involvement in the contraventions, and it is hardly surprising that in the hospitality industry there will be a very small, perhaps even family-run businesses, and very large organisations, but the same standard applies across the board.  The very fact that a person, or a company may run a small family business does not alleviate them from the obligation to pay all entitlements and, as I said, this was not a case whereby there was an oversight in paying a person’s wages properly.

26      In terms of specific deterrence, as best as I can tell, Mr Todaro continues through VCR to trade in the hospitality industry.  He must be accountable for his actions and for the actions of the company that may well continue to employ people in that industry.  The 2010 decision and the current proceedings demonstrate a complete lack of regard by the Respondent for any court processes or for any court orders. 

27      His involvement meant that the employees, Mr Ng and Ms Lei, were deprived of the minimum in their terms and conditions of employment with respect to the underpayment of wages, the underpayment of superannuation and the non‑payment and underpayment of annual leave.  In addition, there has been absolutely no contrition on his [Mr Todaro’s] part.  There has been no cooperation on his part.  He has, at all stages of the process, been recalcitrant in his attitude to the court process and that, in my view, demonstrates a complete lack of disregard for any obligation that he may have.

28      I turn now to the proposed penalty that would be applicable.  In my view, having regard to the comments that I have made, to the submissions and to the appropriate cases, this demonstrates a level of seriousness at the upper end of the spectrum and it would be appropriate having regard to the proposed penalty amounts outlined by the Claimant to impose a penalty at the upper end of the proposed penalty range of $5,280.00 in respect of the Respondent’s eight contraventions. 

29      That is, in respect of each and every contravention, as outlined to the court after applying the relevant principles, a penalty at the maximum proposed penalty amount is the appropriate penalty to impose.  For the avoidance of any doubt, I have been provided with proposed orders submitted by the Claimant and in respect of order 1 [in accordance with order 3 of the orders dated 16 September 2013] the Respondent is to pay penalties pursuant to section 719(1) of the WR Act in the total amount of $42,240.00 in respect of the eight contraventions of the WR Act and the Restaurant, Tearoom and Catering Workers Award 1979, as it continued to operate pursuant to item 31 of schedule A to the Fair Work Transitional Provisions and Consequential Amendments Act 2009 as a Notional Agreement Preserving the State Award (“NAPSA”).

30      The total penalty is comprised of a penalty of:

• $5,280.00 in respect of the Respondent’s contravention of section 182 of the WR Act for failing to pay the basic periodic rate of pay to Mr Ng and Ms Lei, a penalty of $5,280 in respect of the Respondent’s contravention of clause 18 subclause (1)(a) of the NAPSA and section 235(1) of the WR Act for failing to pay Mr Ng and Ms Lei for annual leave taken;
• $5,280.00 in respect of the Respondent’s contravention of clause 18(6) of the NAPSA and section 235(2) of the WR Act for failing to pay Mr Ng and Ms Lei for accrued but untaken annual leave on termination of employment; 
•                   $5,280.00 in respect of the Respondent’s contravention of clause 18(2) of the NAPSA for failing to pay Mr Ng and Ms Lei for annual leave loading; 
•                   $5,280.00 in respect of the Respondent’s contravention of clause 9(1) of the NAPSA for failing to pay Mr Ng and Ms Lei additional rates for ordinary hours worked up to 7 pm;
•                   $5,280.00 in respect of the Respondent’s contravention of clause 9(2) of the NAPSA for failing to pay Mr Ng and Ms Lei additional rates for ordinary hours worked on Saturdays and Sundays; 
•                   $5,280.00 in respect of the Respondent’s contravention of clause 10 of the NAPSA for failing to pay Mr Ng and Ms Lei for overtime hours worked; and 
•                   $5,280.00 in respect of the Respondent’s contravention of clause 37 of the NAPSA for failing - for failing to make superannuation contributions on behalf of Mr Ng and Ms Lei.

31      As I’ve already indicated in my previous orders [which is now order 2], pursuant to order 4 of the orders dated 16 September 2013, the penalty is payable within 28 days.

32      I have considered the percentage portions that ought to apportion between Mr Ng and Ms Lei and they, in my view, set out conveniently by the Claimant as $12,376.32 to Ning Wei Lei and $29,863.68 to Kenny Meng Wei Ng.  By way of observation I have also considered the principles of totality with respect to those amounts.

33      When one looks at the total amount of entitlements that was owed to the two employees, which was in excess of $100,000, then as a matter of proportionality with respect to the findings made of Mr Todaro’s involvement, the period of time over which the contraventions occurred, the seriousness and deliberateness of the contraventions, and without any further information in respect of Mr Todaro, the total amount reflects the seriousness and is not in some way, in my view, disproportionate. 

34      Furthermore, the Claimant seeks orders that the Respondent is to provide to the Claimant evidence of the payment of the penalty being made within 24 hours of that payment being made and I see no reason why that order ought not to be made. 

35      It would certainly mean that there would be no other action needed to be taken by the Fair Work Ombudsman.  The Claimant also seeks liberty to apply on 7 days’ notice in the event that there is noncompliance with any of the preceding orders and, in my view, given how this particular matter has unfolded and over the time period this matter has taken, I will make that order as well.

D. SCADDAN

INDUSTRIAL MAGISTRATE