WESTERN AUSTRALIAN INDUSTRIAL MAGISTRATES COURT

CITATION : 2018 WAIRC 00400

DELIVERED : Wednesday, 4 July 2018

FILE NO. : M 159 OF 2017

CLAIMANT

AND

Rul's Pty Ltd t/as Raj Mahal

first Respondent

raj Kumar Lad

second Respondent

CatchWords : Industrial Law – Penalties – Contraventions of Fair Work Act 2009 (Cth) and Restaurant Industry Award 2010 [MA000119]

Legislation : Fair Work Act 2009 (Cth)
Fair Work Regulations
Crimes Act 1914 (Cth)
Evidence Act 1906 (WA)

Instrument : Restaurant Industry Award 2010 [MA000119]

Case(s) referred

to in reasons : Fair Work Ombudsman v Siner Enterprises Pty Ltd (No. 2) [2018]              FCCA 589

Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] 287 ALR 249

 Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCAFC 59

Briginshaw v Briginshaw [1938] HCA 34

Tomvald v Toll Transport Pty Ltd [2017] FCA 1208

Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181

Gayle Balding, Workplace Ombudsman v Liquid Engineering 2003 Pty Ltd [2008] WAIRComm 350

Cuzzin Pty Ltd v Grnja [2014] SAIRC 36

Result : Penalty issued

Representation:

Claimant : Mr W Keane (of counsel) instructed by Hall & Wilcox

First Respondent : Mr R. Lad (director) for the first respondent

Second Respondent : In person

REASONS FOR DECISION

Introduction

1         Mr Kandel (the claimant) was employed by Rul’s Pty Ltd (the Company) to work in the kitchen of an Indian restaurant operated by the Company at East Victoria Park during two distinct time periods: 1 February 2015 - 30 September 2015 (the 2015 claim period); and 10 October 2015 - 8 August 2016 (the 2016 claim period). On 5 April 2018 I delivered oral reasons (the Liability Reasons) for my findings that the Company had contravened several civil remedy provisions of the Fair Work Act 2009 (Cth) (FW Act) and that the second respondent (Mr Lad), the sole director of the Company, was involved in those contraventions. The civil remedy provisions contravened by the Company, have also been contravened by Mr Lad: s 550(1), FW Act. Subsequently, the parties made submissions on orders (including penalties) to be made as a result of the Liability Reasons. The contraventions included instances where there was a contravention by failing to pay the amount that the Company, an employer, was required to pay to Mr Kandel under a modern award, namely the Restaurant Industry Award 2010 [MA000119] (the Award). On 17 May 2018, I made an order pursuant to s 545(3) of the FW Act that the Company pay to Mr Kandel the sum of $50,697.86 (together with pre-judgment interest) being the outstanding amount owed to Mr Kandel by the Company under the Award. Upon the finding of the contravention of a civil remedy provision, the Court may also, on application, order an employer and any person involved in a contravention to pay a pecuniary penalty that the court considers appropriate: s 546(1) FW Act. Mr Kandel made such an application and these are my reasons for orders to be made as set out below for the payment of pecuniary penalties by the Company and by Mr Lad.

2         It is appropriate to identify the material relied upon for the purpose of these reasons, namely: evidence admitted at trial on 22 March 2018 and 4 April 2018 (subject to comments below under the heading, ‘Rules of Evidence’); the Liability Reasons delivered on 5 April 2018; the claimant’s ‘Underpayment Calculation for 2015 Claim Period and 2016 Claim Period’ schedule filed 26 April 2018; ‘Claimant’s Submissions on Penalty’ filed 26 April 2018; ‘Respondents’ Response to the Claimant’s Submission’ filed 14 May 2018; and matters referred to by the parties in submissions during a hearing on the issue of penalty on 17 May 2018.

3         It is also appropriate to record that, as a result of s 551 of the FW Act, the rules of evidence and procedure for civil matters will be applied in these reasons. The onus of proving an allegation is upon the claimant and an allegation is not proved unless it has been proved on the balance of probabilities. An allegation of a contravention of a civil remedy provision is an allegation of ‘quasi-criminal’ conduct and regard must be had to the nature of the allegation when considering whether it has been proved on the balance of probabilities: Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 362 (Dixon J); Tomvald v Toll Transport Pty Ltd [2017] FCA 1208 per Flick J at [14]. In the context of a penalty decision, it is for the claimant to prove ‘aggravating factors’ relevant to the penalty and, if put in issue by the claimant or not accepted by the court, for the respondent to prove ‘mitigating factors’: Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181 [131].

The Contraventions

4         In the paragraphs below I summarise the findings made (or that follow) from the Liability Reasons.

5         The 2015 Claim Period. In the 2015 claim period, Mr Kandel was paid $350 per week for his work. The Company claimed that this payment, being $25 per hour for 14 hours work per week as a casual employee ($350 per week), discharged any legal obligations to Mr Kandel. My finding was that the Award covered and applied to Mr Kandel and that he worked 20 hours per week. Specifically, I found that he worked four hours per day on each of the Thursday, Friday, Saturday, Sunday, Monday (20 hours) between the hours of 6.00 pm and 10.00 pm. I also found that, under the Award, he was a part-time employee and working as a ‘cook grade 1’. For the reasons given by me on 17 May 2018, I accepted the accuracy of the written submission of Mr Kandel’s solicitor calculating the total underpayment during the 2015 Claim Period to be $5,087.88. The civil remedy provision contraventions during the period are set out below:

1. Failing to pay the minimum rate prescribed by cl 20.1 of the Award (s 45 of the FW Act). The minimum rate during the 2015 claim period was $18.02 per hour until 30 June 2015 and $18.47 per hour after that date.
2. Failing to pay penalty rates on Saturdays prescribed by cl 34 of the Award (s 45 of the FW Act). The Award provided for a penalty rate of 125% of the Monday to Friday rate to be paid on Saturdays.
3. Failing to pay penalty rates on Sundays prescribed by cl 34 of the Award (s 45 of the FW Act). The Award provided for a penalty rate of 150% of the Monday to Friday rate to be paid on Sundays.
4. Failing to pay penalty rates on public holidays prescribed by cl 34 of the Award (s 45 of the FW Act). The Award provided for a penalty rate of 225% of the Monday to Friday rate to be paid on public holidays.
5. Failing to pay annual leave prescribed by cl 35 of the Award (s 45 of the FW Act) and s 90(2) of the FW Act (read with s 44(1)) by failing to pay annual leave loading and untaken annual leave.
6. Failing to give Mr Kandel a payslip within one working day of paying an amount to him in relation to the performance of work as required by s 536(1) of the FW Act.

6         The 2016 claim period. Mr Kandel alleged that, pursuant to an oral contract of employment, he was employed by the Company for the period between 10 October 2015 and 8 August 2016 (the 2016 claim period) and was not paid at all. The Company disputed the existence of the contract and denied that Mr Kandel did any work for it during this period. My finding was that Mr Kandel was employed by the Company and that he worked throughout the 2016 claim period. Specifically, I found that: the Award covered and applied to Mr Kandel; he worked six and a half hours per day on each of the Wednesday, Thursday, Friday, Saturday, Sunday and Monday between the hours of 11.30 am and 2.00 pm and 5.30 pm and 9.30 pm (a total of 39 hours per week). I also found that, under the Award, he was a full-time employee and working as a ‘cook grade 1’. For the reasons given by me on 17 May 2018, I accepted the accuracy of the written submission of Mr Kandel’s solicitor calculating the total underpayment during the 2016 claim period to be $45,609.98. The civil remedy provision contraventions during the period are set out below:

1. Failing to pay the minimum rate prescribed by cl 20.1 of the Award (s 45 of the FW Act). The minimum rate during the 2015 claim period was $18.02 per hour until 30 June 2015 and $18.47 per hour after that date.
2. Failing to pay penalty rates on Saturdays prescribed by cl 34 of the Award (s 45 of the FW Act). The Award provided for a penalty rate of 125% of the Monday to Friday rate to be paid on Saturdays.
3. Failing to pay penalty rates on Sundays prescribed by cl 34 of the Award (s 45 of the FW Act). The Award provided for a penalty rate of 150% of the Monday to Friday rate to be paid on Sundays.
4. Failing to pay penalty rates on public holidays prescribed by cl 34 of the Award (s 45 of the FW Act). The Award provided for a penalty rate of 225% of the Monday to Friday rate to be paid on public holidays.

The underpayment arising from the above four contraventions (minimum rate of pay and penalty rates) was $42,754.82.

5. Failing to pay annual leave prescribed by cl 35 of the Award (s 45 of the FW Act) and s 90(2) of the FW Act (read with s 44(1)) by failing to pay annual leave loading and untaken annual leave.
6. Failing to give Mr Kandel a payslip within one working day of paying an amount to him in relation to the performance of work as required by s 536(1) of the FW Act.
7. Failing to pay the ‘split shift allowance’ required by cl 24.4 of the Award (s 45 of the FW Act). The underpayment arising from this contravention was $1,994.81.
8. Failing to give Mr Kandel a minimum of eight full days off per four week period as required by cl 31.2(e) of the Award (s 45 of the FW Act).
9. Failing to pay Mr Kandel overtime for work done outside the ordinary spread of hours as required by clauses 31 and 33 of the Award (s 45 of the FW Act). The underpayment arising from this contravention was $2,855.17.
10. Failing to pay superannuation as required by cl 30 of the Award (s 45 of the FW Act).

Rules of Evidence

7         In the Liability Reasons I stated that the Industrial Magistrates Court was not bound by the rules of evidence in determining this claim. 1 On reflection, that statement is incorrect. It overlooks s 551 of the FW Act which provides that ‘a court must apply the rules of evidence and procedure for civil matters when hearing proceedings relating to a contravention’: Gayle Balding, Workplace Ombudsman v Liquid Engineering 2003 Pty Ltd [2008] WAIRComm 350; Cuzzin Pty Ltd v Grnja [2014] SAIRC 36 [14]. I consider it necessary to reconsider my findings in the Liability Reasons in light of the evidence relied upon for those findings, as set out in the Liability Reasons. This reconsideration revealed three matters of significance.

8         First, no question arises as to the admissibility of evidence relied upon to resolve the critical issue at trial, namely, the creditability of Mr Kandel and Mr Lad. Mr Lad was not accepted as a credible witness because of the implausibility of his explanation for the inconsistency between his evidence and the contents of certain exhibits: No 2 and No 3. 2 Exhibit 2 comprised copies of text messages said to have been sent by mobile phone from Mr Kandel to Mr Lad. Those copies were admissible under s 79C(1) of the Evidence Act 1906 (WA) as tending to establish the oral evidence of Mr Kandel as to the content of text messages that he sent. Exhibit 3 was a copy of a delivery docket said to have been signed by Mr Kandel. It was admissible under s 79C(2a) of the Evidence Act 1906 (WA) as a business record. Other exhibits referred to in the Liability Reasons were exhibits 5, 12 and 13. Exhibit 5 was admissible as business records of the Company. Exhibit 13 was a document created by Mr Kandel and admissible. Upon objection, exhibit 12 would have been ruled inadmissible because the author of the document was not available for cross-examination. However, for that same reason, it is expressly stated in the Liability Reasons that no weight was placed on exhibit 12.3

9         Secondly, few (if any) objections were taken by either side as to the admissibility of evidence. It may safely be assumed that the absence of objections reflected a pragmatic approach by counsel for the claimant and reflected a state of ignorance by the respondents. In the result, each party made submissions on the weight that should be attributed to the different items of evidence in the case, including submissions that I should wholly discount evidence where, for example, it contained hearsay statements. The Liability Reasons reflect those submissions. For example, it is expressly stated in the Liability Reasons that no weight is accorded to the evidence of Ms Eswaraiah to the extent that she was repeating matters told to her by a third party and not stating her own observations.4

10      Thirdly, measures were taken to ensure that, so far as possible, the respondents were not disadvantaged in having to defend the claim without being legally represented. For example, at the commencement of the trial the relevant issues (as revealed by the documents on the court file) were identified.5 It may also be noted that the respondent’s accountant was expressly permitted to sit at the bar table and assist Mr Lad.6.

11      For the above three reasons, and subject to giving the parties an opportunity to put a contrary view, I do not propose to revisit the findings in the Liability Reasons. On the publication of these reasons, I will invite the parties to address me on the issue.

Relevant Legal Principles

12      In a schedule to these reasons, I have detailed the relevant legal principles to be applied in determining an application that a person pay a pecuniary penalty.

Application of Legal Principles to the Facts of the Claim

13      A penalty will be imposed for each of the six contraventions in the 2015 claim period as grouped in paragraph 5 above and for each of the ten contraventions in the 2016 claim period as grouped in paragraph 6 above. This grouping follows from the application of the law concerning s 557 of the FW Act as set out in paragraphs [D.1]; [D.2](a) - (b) of the schedule. A distinct and separate ‘course of conduct’ of the Company is observable with respect to each of the 2015 claim period and the 2016 claim period. The conduct during the 2015 claim period was characterised by underpayment arising primarily from the Company paying Mr Kandel a ‘flat’ hourly rate hourly ($25) for 14 hours per week when, in fact, Mr Kandel worked for 20 hours per week and was entitled to penalty rates. The conduct during the 2016 claim period was characterised by a failure to make any payment when Mr Kandel worked for 39 hours per week, including at times and days when penalty rates were applicable.

14      The maximum penalties for each contravention by the Company during the 2015 claim period was $51,000 - $54,000, a maximum total of $306,000 - $324,000 for six contraventions. The maximum penalties for each contravention by Mr Lad during the 2015 claim period was $10,200 - $10,800, a maximum total of $61,200 - $64,800 for six contraventions. The maximum penalties for each contravention by the Company during the 2016 claim period was $54,000, a maximum total of $540,000 for ten contraventions. The maximum penalties for each contravention by Mr Lad during the 2016 claim period was $10,800, a maximum total of $108,000 for ten contraventions.

15      The following factors are of significance to fixing a penalty in the circumstances of this claim (see C.1 of the schedule).

1. The Company acquired the restaurant business at the commencement of the 2015 claim period and ‘took over’ the employment of Mr Kandel. There is no evidence of the terms and conditions of Mr Kandel’s employment by his previous employer. During the trial, Mr Lad testified to his experience as a cook. There is no evidence of him having any experience as the operator of a restaurant business. His most recent work experience was not in hospitality; he had worked as a taxi driver. Mr Lad engaged accountants (‘Know Books Know Tax’) to assist him with his new business venture. The accountants provided payroll administrative support to the Company i.e. processed timesheets, arranged transfers to employee bank and superannuation accounts, generated payslips as requested etc.
2. The restaurant business was a small enterprise when assessed by total sales and total salary payments over the period July 2015 to March 2016 as recorded in ‘Activity statements’ submitted to the Australian Taxation Office (exhibit 5- I). Monthly sales (including GST) were reported to be between $20,000 - $33,000 and monthly salary payments were reported to be between $5,000 - $7,000. The evidence suggests that the ‘maximum’ complement of staff comprised a cook or chef, a kitchen hand and one-two persons at ‘front of house’.
3. There is significant overlap in all of the contraventions during the 2015 claim period in the sense that (with the exception of the payslip contravention), the contraventions all stemmed from paying Mr Kandel at an incorrect hourly rate for an inadequate number of hours. The ‘flat’ rate of $25 per hour was paid on an assumption of 14 hours work per week. This rate of pay was in excess of the minimum Award rate of between $18.02 - $18.47 per hour. However, the Company failure to adjust Mr Kandel’s pay to reflect the actual hours of work of 20 hours per week and to pay penalty rates resulted in the underpayment of $5,087.88. This equates to an underpayment of approximately $150 per week over a period of 34 weeks. Given the extent of this underpayment, I would characterise the contraventions during the 2015 claim period as being of moderate seriousness. There is no evidence of the Company having actual knowledge of relevant obligations under the Award and deliberately ignoring those obligations. However, it is a notorious fact that ‘penalty rates’ are common place in the hospitality industry and this ought to have prompted the Company to seek advice on its obligations to employees under the Award.
4. There is also an overlap in all of contraventions during the 2016 claim period in the sense that the contraventions all stemmed from not paying Mr Kandel at all for working 39 hours per week resulting in the underpayment of $45,609.98. This equates to an underpayment of approximately $1,060 per week over a period of 43 weeks. Given the extent of this underpayment, the contraventions during the 2016 claim period can only be characterised as egregious. The contraventions were deliberate. In the Liability Reasons, I summarised the evidence of Mr Kandel as to the circumstances of him working without pay during the 2016 claim period. For the same reasons that I am satisfied as to Mr Kandel working throughout the 2016 claim period (stated in the Liability Reasons), I am satisfied as to the veracity of the following evidence7:

Mr Kandel gave evidence of an oral agreement made in July or August 2016 between himself and Mr Lad in the presence of his wife, Ms Kandel. He would be offered fulltime employment as a Chef in the restaurant which was operated by the Company. He would be paid $55,000 per annum., However, he would not be paid any money until March, 2016 when (he would be paid) and Mr Lad would assist Mr Kandel with a permanent residency sponsorship. Part of the oral agreement involved Mr Lad agreeing that Company that the Company would employ his wife, Ms Kandel, as a Restaurant Manager and there would be an appropriate visa sponsorship undertaken by the Company for her employment. His evidence is that when he made oral demands for payment commencing in March, 2016 and that Mr Lad rebuffed him.

5. For the purpose of determining an appropriate penalty, the evidence quoted in the previous paragraph of the oral agreement made in July or August 2016 reveals that the Company, through Mr Lad, took advantage of the vulnerable immigration status of Mr Kandel to secure a significant financial advantage to itself at the expense of Mr Kandel. It is an aggravating factor for the purpose of fixing a penalty for contraventions during the 2016 claim period.
6. Mr Lad does not accept the findings in the Liability Reasons. Consequently, the Company and Mr Lad have not exhibited contrition and not taken corrective action. There is no mitigation to be found in any corrective action. However, Mr Lad’s non-acceptance of my findings is not an aggravating factor for the purpose of fixing a penalty.
7. There is no suggestion that the Company or Mr Lad have any relevant record of contraventions. To that extent, the contraventions before me may be regarded as out of character.
8. The evidence of the capacity of the Company to pay any penalty is limited. At the hearing on 17 May 2018, Mr Lad informed the court that: the Company was in a ‘healthy position’ as at June 2017; after incurring losses in 2018, the Company ceased trading in March 2018; at present, the Company does not own any assets; the Company has prospects of resuming trading if it is successful in a claim it proposes to make against a landlord. In the same penalty hearing, Mr Lad informed the court that he had a limited capacity to pay any penalty. He stated: after the closure of the restaurant business in March 2018 that he had not been working and consequently he had no income; he had no assets apart from a small amount of savings of $1,000 and a car; he proposed to resume receiving an income (before his savings ran out) either by re-opening the restaurant business at a new location or by working for an employer as a restaurant manager or a cook. Counsel for Mr Kandel submitted that, having regard to the vagueness of the assertions by Mr Lad, the Company and Mr Lad had failed to discharge the onus of proving ‘financial hardship’ as a significant mitigating factor in circumstances of this case. I have reached the view that, for the purposes of fixing a penalty, it is appropriate to have regard only to the following: when the Company is operating a business, it has the capacity to generate gross monthly sales (including GST) of between $20,000 - $33,000 (as noted above); the Company may or may not be operating a business in the future; Mr Lad has the capacity to earn an income of a level that reflects his role as the manager of a business of a Company with gross monthly sales of between $20,000 - $33,000; and Mr Lad is likely to earn an income in the future. I am unable to be satisfied as to whether Mr Lad has assets available to him to pay any penalty that may be imposed. In the result, save that any penalty I impose ought not be oppressive given the size of the operations of the Company and the capacity of Mr Lad to earn an income, on the material before me, I am not satisfied that ‘financial hardship’ is a significant mitigating factor.

16      The purposes to be served by a penalty fixed by the court is discussed in the schedule at [B.1] - [B.2].

1. The penalty must be fixed at a level that promotes the public interest by encouraging compliance with obligations upon employers contained in the FW Act. The respondents in this case and all employers must be deterred from ‘the cynical calculation involved in weighing up the risk of penalty against the profits to be made against a contravention’: Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCFCA 20 [63].
2. The penalty must also be fixed at a level that is proportionate to the gravity of the contravening conduct. I have already made observations in paragraph 15 on the gravity of the contravening conduct.
3. The penalty must also be fixed at a level that is consistent with penalties imposed in comparable cases. In Fair Work Ombudsman v Siner Enterprises Pty Ltd (No. 2) [2018] FCCA 589, Lucev J fixed a penalty at 45% of the maximum for each of five contraventions of the Award in circumstances where the employer failed to make any payment to an employee who worked as a restaurant cook for a four month period.

17      Reflecting on the factors set out in paragraph 15, the purposes set out in paragraph 16, and the loss occasioned by each contravention, I consider that the following penalties are appropriate.

1. 2015 claim period

1. Minimum rate contravention (1): 20% of maximum (i.e. $10,200)

2. - 4. Penalty rate contraventions (3): 20% of maximum ($30,600)

5. Annual leave contravention (1): 20% of maximum ($10,200)

6. Payslip contravention (1): 5% of maximum ($2,550)

Penalty total (before application of totality principle):

The Company: $53,550

Mr Lad: $10,710

2. 2016 claim period

1. Minimum rate contravention (1): 50% of maximum (i.e. $27,000)

2. - 4. Penalty rate contraventions (3): 50% of maximum ($81,000)

5. Annual leave contravention (1): 20% of maximum ($27,000)

6. Payslip contravention (1): 20% of maximum ($27,000)

7. Split shift contravention (1): 20% of maximum ($27,000)

8. Time off contravention (1): 20% of maximum ($27,000)

9. Overtime contravention (1): 20% of maximum ($10,800)

10. Superannuation contravention (1): 50% of maximum ($27,000)

Penalty total (before application of totality principle):

The Company: $253,800

Mr Lad: $50,760

18      Finally, as set out in [D.3] of the schedule it is necessary to apply the ‘totality principle’ i.e. to have a ‘last look’ at the resulting penalty and consider whether the aggregate penalties of $307,330 upon the Company and $61,470 upon Mr Lad (being the sum of $53,530 and $10,710 for the six contraventions during the 2015 claim period and $253,800 and $50,760 for the ten contraventions during the 2016 claim period) are out of proportion to the overall contravening conduct such that it is necessary to reduce the penalty for individual contraventions. The lengthy period of time over which the contraventions occurred and the extent of underpayments to Mr Kandel compared to his Award entitlements are factors that weigh in favour of a condign penalty of significance. Nevertheless, I have reached the conclusion that two factors weigh in favour of reduction individual penalties set out in paragraph 17. First, there is a measure of overlapping conduct among the contraventions. Secondly, total penalties of that magnitude would be crushing having regard to the situation of each of the respondents. It is appropriate to reduce the individual penalties set out in paragraph 17 by 20% to result in an overall penalty that is proportionate to the overall contravening conduct, resulting in aggregate penalties of $245,864 upon the Company and $49,176 upon Mr Lad.

19      The result will be orders that:

1. Penalties in the sum of $245,864 are to be paid to the claimant by the first respondent, for the contravention of the civil penalty provisions in paragraphs 5 and 6 of these reasons.
2. Penalties in the sum of $49,176 are to be paid to the claimant by the second respondent, for the contravention of the civil penalty provisions in paragraphs 5 and 6 of these reasons.

M. FLYNN

INDUSTRIAL MAGISTRATE
Schedule A Pecuniary Penalty Orders under the Fair Work Act 2009 (Cth)

A. Statutory Power to Impose a Penalty

[A.1]  Section 546(1), (2) of the FW Act on ‘pecuniary penalty orders’ relevantly provides:

(1) [An] eligible State or Territory court may, on application, order a person to pay a pecuniary penalty that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision.

 (2) The pecuniary penalty must not be more than:

(a) if the person is an individual—the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2); or

(b) if the person is a body corporate—5 times the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2).

[A.2]  The rate of a penalty unit is set by s 4AA of the Crimes Act 1914 (Cth): FW Act, s 12. The relevant rate is that applicable at the date of the contravening conduct:

Before 28 December 2012   $110

Commencing 28 December 2012  $170

Commencing 31 July 2015   $180

Commencing 1 July 2017   $210

[A.3] Identifying the maximum penalty for a contravention is an important step because it is a penalty reserved for the most serious case and against a ‘benchmark’ or ‘yardstick’ against which the Court may assess a penalty that is proportionate to the circumstances the present case: Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70 [41] - [46] per Stone and Buchanan JJ.

B. Fixing a Penalty: the Purpose

[B.1]  The purpose served by penalties was examined by White J in Director of the Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2016] FCA 413 where it is stated at [14]-[ ] (omitting some quotations and citations):

[14] In Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; at [59], the plurality (French CJ, Kiefel, Bell, Nettle and Gordon JJ) said, in relation to civil penalties generally, that they are not retributive but are ‘essentially deterrent or compensatory and therefore protective’ Earlier, at [24], the plurality had noted that civil penalties are part of the range of enforcement mechanisms available to regulators by which to achieve compensation, prevention and deterrence. The plurality also referred to the central role of deterrence in the fixing of civil penalty … [W]hereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty is primarily if not wholly protective in promoting the public interest in compliance. …
[16] Courts now tend to regard contraventions of industrial laws more seriously than may have been the case generally in the past.
[17] The Court is to determine a penalty which is proportionate to the contravening conduct and the contravenor’s circumstances by a process of instinctive synthesis after taking into account all relevant factors.
[18] A number of the authorities in this Court have emphasised that deterrence has both personal and general aspects.

[B.2]  In Director of the Fair Work Building Industry Inspectorate v Cartledge [2014] FCA 1047 (Mansfield J) observed at [51] - [52], omitting citations:

Ultimately, the overriding principle is to ensure that the penalty is proportionate to the gravity of the contravening conduct. By a process of ‘instinctive synthesis’, a court is required to take into account all relevant factors and to arrive at a single result which takes due account of them all. Proportionality and consistency commonly operate as a final check on the penalty.

C. Fixing a Penalty: Relevant Factors

[C.1]   In Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 [14], Tracey J adopted the following ‘non-exhaustive range of considerations to which regard may be had in determining whether particular conduct calls for the imposition of a penalty, and if it does the amount of the penalty’ which had been set out by Mowbray FM in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7:

• The nature and extent of the conduct which led to the breaches.
• The circumstances in which that conduct took place.
• The nature and extent of any loss or damage sustained as a result of the breaches.
• Whether there had been similar previous conduct by the respondent.
• Whether the breaches were properly distinct or arose out of the one course of conduct.
• The size of the business enterprise involved.
• Whether or not the breaches were deliberate.
• Whether senior management was involved in the breaches.
• Whether the party committing the breach had exhibited contrition.
• Whether the party committing the breach had taken corrective action.
• Whether the party committing the breach had cooperated with the enforcement authorities.
• The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements and
• The need for specific and general deterrence.

[C.2] The significance of the capacity (or incapacity) of a contravener to pay any pecuniary penalty fixed by the Court was examined by Lucev J in Fair Work Ombudsman v Siner Enterprises Pty Ltd (No. 2) [2018] FCCA 589 at [31] – [34] (omitting citations and quotation marks):

Whilst employers, large, medium or small, cannot overcome financial difficulties by underpaying employees or avoiding statutory entitlements, properly evidenced, and for proper reasons, incapacity to pay may afford some relief by way of mitigation of penalty.
[S]ize [is] a factor to be considered in relation to penalty. [However,] regardless of size, corporate employers are obliged to meet minimum employment standards; when corporate employers do not meet minimum employment standards it will be normal to impose an “appropriate” monetary sanction; and the sanction must be at a meaningful level.
Regard [may be had] to the fact that [an] employer respondent [is] a small enterprise upon whom the imposition of a large fine [is] likely to be oppressive.
[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.

[C.3]   The list in [C.1] is not ‘a rigid catalogue of matters for attention. At the end of the day the task of the Court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations.’ (Buchanan J in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [91]).

D. Fixing a Penalty: Multiple Contraventions

[D.1]   Section 557 of the FW Act on ‘course of conduct’ relevantly provides:

(1) For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:

(a) the contraventions are committed by the same person; and

(b) the contraventions arose out of a course of conduct by the person.

(2) The civil remedy provisions are the following:

(a) subsection 44(1) (which deals with contraventions of the National Employment Standards);

(b) section 45 (which deals with contraventions of modern awards);

(c) section 50 (which deals with contraventions of enterprise agreements);

(d) section 280 (which deals with contraventions of workplace determinations);

(e) section 293 (which deals with contraventions of national minimum wage orders);

(f) section 305 (which deals with contraventions of equal remuneration orders);

(g) subsection 323(1) (which deals with methods and frequency of payment);

(h) subsection 323(3) (which deals with methods of payment specified in modern awards or enterprise agreements);

(i) subsection 325(1) (which deals with unreasonable requirements on employees to spend or pay amounts);

(ia) subsection 325(1A) (which deals with unreasonable requirements on prospective employees to spend or pay amounts);

(j) subsection 417(1) (which deals with industrial action before the nominal expiry date of an enterprise agreement etc.);

(k) subsection 421(1) (which deals with contraventions of orders in relation to industrial action);

(l) section 434 (which deals with contraventions of Ministerial directions in relation to industrial action);

(m) subsection 530(4) (which deals with notifying Centrelink of certain proposed dismissals);

(n) subsections 535(1), (2) and (4) (which deal with employer obligations in relation to employee records);

(o) subsections 536(1), (2) and (3) (which deal with employer obligations in relation to pay slips);

(p) subsection 745(1) (which deals with contraventions of the extended parental leave provisions);

(q) section 760 (which deals with contraventions of the extended notice of termination provisions);

(r) subsection 785(4) (which deals with notifying Centrelink of certain proposed terminations);

(s) any other civil remedy provisions prescribed by the regulations.

(3) Subsection (1) does not apply to a contravention of a civil remedy provision that is committed by a person after a court has imposed a pecuniary penalty on the person for an earlier contravention of the provision.

[D.2] For the purpose of applying s 557(1) of the FW Act:

(a)   The contravention of two or more different terms of the National Employment Standards (NES) do not constitute a (single) contravention a civil remedy provision and the contravention of two or more different terms of a modern award do not constitute a (single) contravention a civil remedy provision: Rocky Holdings Pty Ltd & Anor v Fair Work Ombudsman [2014] FCAFC 62 at [8], [23] and [27] per North, Flick and Jagot JJ;

(b)   Each separate obligation found in a modern award is to be regarded as a ‘term’, for the purposes of s 557(1) and the ascertainment of a ‘term’ does not depend upon the clause numbering, but on matters of substance i.e. the different obligations which can be identified: Fair Work Ombudsman v Lohr [2018] FCA 5 [31]. For example, a failure to pay penalty rates for each of Saturday, Sunday and a Public Holiday as required by cl 34.1 of the Restaurant Industry Award 2010 gives rise to the contravention of three different terms of the award and those three contraventions cannot constitute a single contravention for the purposes of section 557(1): Fair Work Ombudsman v Siner Enterprises Pty Ltd (No.2) [2018] FCCA 589 [17] - [21];

(c)   The contravention one distinct term of the NES or one distinct term of a modern award in respect of multiple employees, may constitute a single contravention of a civil remedy provision: Rocky Holdings at [14].

[D.3] In a case of multiple contraventions, it will be necessary to apply the ‘totality principle’. Having determined an appropriate level of penalty for each contravention (after the application of s 557 of the FW Act), it is then necessary to ‘to look at the aggregate of those penalties in the light of the overall conduct of the contravenor, to form a view as to whether that aggregate was out of proportion to that overall conduct’; if the aggregate is ‘a total penalty that is disproportionately harsh, it may be necessary to reduce the penalty for individual contraventions’: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) [2008] FCAFC 8; [47] – [52].

Pecuniary Penalty to be paid to the Commonwealth, an organisation or a person

[8]  Section 546(3) of the FWA also provides:

(3) The court may order that the pecuniary penalty, or a part of the penalty, be paid to:

(a) the Commonwealth; or

(b) a particular organisation; or

(c) a particular person.

[9]  In Milardovic v Vemco Services Pty Ltd (Administrators Appointed) (No 2) [2016] FCA 244 [40] - [44], Mortimer J summarised the law (omitting citations and quotations) on this provision in light of Sayed v Construction, Forestry, Mining and Energy Union [2016] FCAFC 4 as follows:

The power conveyed by s 546(3) is ordinarily to be exercised by awarding any penalty to the successful applicant. The initiating party is normally the proper recipient of the penalty as part of a system of recognising particular interests in certain classes of persons in upholding the integrity of awards and agreements the subject of penal proceedings. Where a public official vindicates the law by suing for and obtaining a penalty, it is appropriate that the penalty be paid to the Consolidated Revenue Fund. Otherwise, the general rule remains appropriate, that the penalty is to be paid to the party initiating the proceeding, with the ‘Gibbs exception’ (Gibbs v The Mayor, Councillors and Citizens of City of Altona [1992] FCA 553) that the penalty may be ordered to be paid to the organisation on whose behalf the initiating party has acted.