INDUSTRIAL LAW – Shop Employees (State) Award and annual holidays loadings – breach – civil penalty – consideration of matters relevant to penalty.
Penalty hearing in relation to contraventions of the Workplace Relations Act for failing to pay Award entitlements for causal loadings, penalty rates for Sundays and public holidays, together with minimum hourly rate.
The Court’s approach to determining penalty
I accept the applicant’s submission that the following is the correct approach in determining an appropriate penalty to impose.
The first step for the Court is to identify the separate contraventions involved. Each breach of each separate obligation found in the AFPCS, the NAPSA is a separate contravention of a term of an applicable provision for the purposes of s.719.
However, s.719(2) provides for treating multiple breaches, involved in a course of conduct, as a single breach.
Secondly, to the extent that two or more contraventions have common elements, this should be taken into account in considering what is an appropriate penalty in all the circumstances for each contravention. The respondents should not be penalised more than once for the same conduct. The penalties imposed by the Court should be an appropriate response to what the respondent did. This task is distinct from and in addition to the final application of the “totality principle”.
25.Thirdly, the Court will then consider an appropriate penalty to impose in respect of each course of conduct, having regard to all of the circumstances of the case.
Fourthly and finally, having fixed an appropriate penalty for each group of contraventions or course of conduct, the Court should take a final look at the aggregate penalty, to determine whether it is an appropriate response to the conduct which led to the breaches. The Court should apply an “instinctive synthesis” in making this assessment. This is what is known as an application of the “totality principle”.
Application of facts to law
Therefore the Court should consider that the maximum penalty it could impose in this matter is for eight contraventions being $264,000 for Roselands and $52,800 for Mr Aloisio.
Factors relevant to penalty – I refer to my earlier posting in this respect.
Nature and extent of the conduct
The Fair Work Ombudsman investigation extended over more than a year and identified substantial underpayments of over $94,000 in respect to 40 employees over a period of three years. I accept that the underpayment amounts were significant given that employees were being paid a flat rate. Some of the underpayments to particular employees exceeded $10,000 each.
The breaches identified by the investigation all stemmed from an incorrect application of the provisions of the NAPSA and/or the Annual Holidays Act. There is no evidence that the breaches were intentional or deliberate.
On 19 February 2009, Mr Fedele informed Inspector Hehir that Roselands was undertaking an audit of all existing employees from 1 December 2006 to date.
On 4 March 2009, Mr Fedele informed Inspector Hehir that Roselands:
- …has taken action to ensure they met the requirements of the” NAPSA and that “breaches can be attributable to being naïve and a lack of understanding of the legislative requirements. It was not by choice or their unwillingness to comply with their obligations. It is simply a lack of understanding.
On 30 April 2009 Inspector Hehir wrote to both respondents asking that there be future compliance with the NAPSA including the Annual Holidays NAPSA.
On 13 July 2009, Mr Fedele informed Inspector Hehir that “our client wants to ensure you that they will rectify the breaches and have taken action to ensure that they meet the requirements of the” NAPSA…. Given the above circumstances, we request your favourable consideration to take no further action against the company or its officers for breaches of the Act.” The calculations provided included calculations for annual holiday entitlements to casual employees engaged at Wagga Wagga.
On 28 August 2009, Inspector Hehir wrote to both respondents as a follow up to check whether or not there was compliance with the NAPSA.
On 22 October 2009, Inspector Hehir wrote to both respondents advising them that the company was still in breach of Annual Holidays NAPSA.
On 18 November 2009, Inspector Hehir again wrote to both respondents as a follow up to check whether or not there was compliance with the NAPSA in the Roselands shop.
On 5 February 2010, Inspector Hehir again wrote to both respondents outlining that not only the company was still in breach of the NAPSA but no back payments were made for past breaches that were to be rectified in early 2009.
On 11 February 2010, Roselands wrote to Inspector Hehir stating that the business has been paying $14.81 an hour:
- We apologise for our omission, unfortunately at this time we had been without a bookkeeper and when our current person was employed in March, wage rates were updated. We were not aware that the matter had not been addressed before this and have taken steps to ensure that all employees have been back paid for the shortfall in their wage rates.
The hourly rate of $14.81 an hour is the rate in the APCS as at 24 July 2006.
The evidence shows that despite the company stating that it had taken steps to become compliant in early 2009 there was delay in achieving compliance. It did not happen until February 2010.
Mr Aloisio was a Director of Roselands until 17 February 2010.
On 22 June 2010 Mr Aloisio became a sole director of a new company registered as Fruitologist Wagga Wagga Pty Ltd which operates a fruit and vegetable retail shop in Wagga Wagga.
Nature and extent of loss or damage
The loss to employees is significant. The extent of the loss is particularly significant in light of the fact that many of the employees were juniors and or casual employees.
Similar previous conduct
There is no evidence of similar previous conduct.
Whether the breaches arose out of the one course of conduct
I accept that the respondents are entitled to the benefit of s.719(2) in respect of multiple breaches of each term that has been committed by the respondents. This benefit relates only to multiple breaches of the same term, it does not relate to breaches of different subsections of the Workplace Relations Act or subclauses of either the NAPSAs.
Size of the business
In my view, the size and financial circumstances of Roselands’ business should be of some but limited relevance in the Court’s determination of penalty: see Kelly v Fitzpatrick  FCA 1080 at  where it was said:
- No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction must be imposed at a meaningful level.
Deliberateness of the breaches
Mr Aloisio admits that he was the ultimate decision maker in respect of human resourcing decisions of Roselands and was in charge of the day to day management of the company in Wagga Wagga.
The chronology demonstrates that the company was in the first instance careless and by mid 2009 tardy in failing to comply with the NAPSA and the Annual Holidays NAPSA.
The respondents have referred to evidence before the Court to explain how the alleged breaches occurred. In particular, they refer to the absence of a bookkeeper, and the reliance on outdated rates of pay.
Contrition, corrective action, co-operation with authorities
I accept the Fair Work Ombudsman’s submission that this involves three related, yet distinct elements.
In relation to corrective action, the underpayments were rectified in 2009-2010. However had the Fair Work Ombudsman not conducted audits in August 2009 and in early 2010 some of the underpayments would probably not have been rectified and the business would have continued to be in breach of the Annual Holidays NAPSA and the NAPSA despite assurances that it was compliant in early 2010.
There is no evidence that new structures and processes have been put in place to avoid further breaches.
The Fair Work Ombudsman acknowledges that during the investigation the respondents co-operated with it and took some corrective action. Since commencing these proceedings the respondents have adopted a co-operative approach to resolving these proceedings by entering into an agreed statement of facts.
In relation to contrition, the company has apologised, albeit that it has not explained to the employees why the underpayments have come about or why the underpayments were being rectified. The letters simply stated “we apologise for any inconvenience”.
Instinctive synthesis test
Having fixed an appropriate penalty for each course of conduct, the Court should take a final look at the aggregate penalty, to determine whether it is an appropriate response to the conduct which led to the breaches, and is not oppressive or crushing: see Kelly v Fitzpatrick  FCA 1080, ; Merringtons at  per Gray J,  per Graham J,  per Buchanan J.
Making good the underpayments to employees has already been a very substantial burden on Roselands. The experience may well have been a factor leading to the separation of the business as between Roselands and Mr Aloisio. That separation of the business is, in my view, a relevant factor to take into account. Mr Aloisio now has a significant interest in the business through a separate legal entity. The interest of Roselands has been reduced. While the penalty imposed for a corporate respondent is appropriately higher than that placed on a natural person, the penalties imposed in this case should reflect the realities of the business division between the respondents, and respective culpability.
The circumstances, in my view, call for the imposition of a meaningful penalty on both respondents. While the conduct was not deliberate, it came about from a failure to enquire, involved substantial breaches and continued for a significant period of time, even after the breaches were brought to the attention of Roselands by the Fair Work Ombudsman. On the other hand, the respondents have been co-operative, the employees have all been paid and the respondents have shown contrition. Their co-operation has appropriately reduced the scope of the dispute between the parties. I consider that a reduction of 20 per cent in the penalties which the Court would otherwise impose gives appropriate recognition to the admissions made by the respondents.
Having taken into account all of the above matters, I conclude that the appropriate penalty to impose on Roselands for the breaches is $88,500 and that the appropriate penalty to impose on Mr Aloisio in respect of the breaches attributable to him is $20,700. After a 20 per cent reduction for co-operation, the total penalty is $70,800 for Roselands and the total penalty for Mr Aloisio is $16,650.
The Fair Work Ombudsman applied for any penalties to be paid to the Commonwealth into consolidated revenue and there will be an order to that effect.
Brisbane Barrister – David Cormack