Fair Work Ombudsman v Yorktor Pty Ltd [2021] FCCA 779 (16 April 2021)

Last Updated: 20 April 2021

FEDERAL CIRCUIT COURT OF AUSTRALIA

Fair Work Ombudsman v Yorktor Pty Ltd [2021] FCCA 779

File number(s):	MLG 4550 of 2019
Judgment of:	JUDGE MCNAB
Date of judgment:	16 April 2021
Catchwords:	INDUSTRIAL LAW – admitted contraventions of Fair Work Act 2009 – failure to comply with a compliance notice pursuant to section 716(5) of the Fair Work Act – First Respondent in liquidation – assessment of pecuniary penalties as against Second Respondent who admitted to involvement in the contravention within the meaning of section 550 of the Fair Work Act 2009 – non-exhaustive list of factors relevant to the imposition of a penalty – imposition of penalty appropriate to discourage similar conduct in the industry.
Legislation:	Corporations Act 2001 (Cth) ss 471B, 491. Fair Work Act 2009 (Cth) ss 546, 550, 716. Hospitality Industry Award 2010 cll 13.1, 32.2, 32.3.
Cases cited:	Kelly v Fitzpatrick [2007] FCA 1080 Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550
Number of paragraphs:	31
Date of last submission/s:	16 April 2021
Date of hearing:	16 April 2021
Place:	Melbourne
Solicitor for the Applicant:	The Fair Work Ombudsman
The Respondents:	No Appearance

ORDERS

		MLG 4550 of 2019
BETWEEN:	FAIR WORK OMBUDSMAN Applicant
AND:	YORKTOR PTY LTD First Respondent GARY ROBERT WILLIAMS Second Respondent

ORDER MADE BY:	JUDGE MCNAB
DATE OF ORDER:	16 APRIL 2021

THE COURT DECLARES THAT:

1. The Second Respondent, by his involvement within the meaning of section 550 of the Fair Work Act 2009 (Cth) (“the FW Act”) of the First Respondent’s failure to comply with a compliance notice issued on 25 July 2019, contravened section 716(5) of the FW Act.

THE COURT ORDERS THAT:

2. Pursuant to section 546(1) of the FW Act, the Second Respondent pay a pecuniary penalty in the total sum of $3500.00 to the Commonwealth for the contravention set out in paragraph 1 herein, within 21 days of the date of these orders.
3. Pursuant to section 546(3)(c) of the FW Act, the Applicant remit the pecuniary penalty paid to the Commonwealth, in accordance with paragraph 2 herein, to Ms Melissa Fulton.

REASONS FOR JUDGMENT
(Delivered Ex Tempore – Revised From Transcript)

Judge McNab:

INTRODUCTION

1. This matter involves an admitted contravention by the First Respondent (“Yorktor Pty Ltd”), pursuant to s716(5) of the Fair Work Act 2009 (Cth) (“the FW Act”), in failing to comply with a compliance notice issued by a Fair Work Inspector on 25 July 2019. The Second Respondent (“Mr Gary Williams”) has admitted to his involvement in the contravention within the meaning of s550 of the FW Act.
2. The Applicant (“the Fair Work Ombudsman”) is seeking a declaration as to that contravention and the imposition of a pecuniary penalty against the Second Respondent pursuant to s546(1) of the FW Act. The proceedings are stayed as against the First Respondent pursuant to s471B of the Corporations Act 2001 (Cth) (“the Corporations Act”), as the First Respondent was placed into liquidation after proceedings were commenced.
3. The issue to be determined is the quantum of the penalty to be imposed on the Second Respondent.

BACKGROUND

4. In this matter the Court has the benefit of an agreed statement of facts filed on 27 November 2020, which was signed by the Second Respondent on 9 November 2020.
5. From 16 May 2015 until 24 November 2018, Yorktor Pty Ltd (“the First Respondent”), who is in liquidation, employed Ms Melissa Fulton (“the employee”) on a casual basis as a bar attendant and kitchen hand. She was classified as a 'Food and Beverage Attendant Grade 2' and a 'Kitchen Attendant Grade 1', as set out in clause A.2 of Schedule B to the Hospitality Industry Award 2010 (“the award”), and was paid a flat hourly rate of:

(1) $21 for all hours work when she performed duties as a bar attendant; and
(2) $23 for all hours of work performing duties as a kitchen hand.

6. Due to enquiries made by the employee to the Applicant in May 2019 in relation to her rate of remuneration, Fair Work Investigator Melissa King (“FWI King”) commenced an investigation on 21 May 2019 in relation to the employee’s employment with the First Respondent. As a result of the investigation, FWI King formed a reasonable belief, pursuant to s716(1) of the FW Act, that the First Respondent contravened the following terms of the award:

(1) clause 13.1 (minimum wages);
(2) clause 32.1 (Saturday, Sunday and Public Holiday penalties); and
(3) clause 32.3(e) (evening penalty).

7. On 24 July 2019, FWI King had a telephone conversation with the Second Respondent, who was the Manager of the business and a Director of the First Respondent since 2008. The Second Respondent was responsible for the overall operation and management control of the First Respondent and the person who was responsible for ensuring the that First Respondent complied with its legal obligations under the FW Act. During the telephone conversation, FWI King advised the Second Respondent of the findings from the investigation, and that she would be issuing a compliance notice to the First Respondent, pursuant to s716 of the FW Act.
8. On 25 July 2019, FWI King issued a compliance notice to the First Respondent pursuant to s716(2) of the FW Act (“the compliance notice”) in respect of the employee. The notice was served at the registered office of the First Respondent by FWI Caroline Weston. It is admitted that the compliance notice satisfied the requirements of s716(3) of the FW Act. The compliance notice required the First Respondent:

(a) to take the following specified actions by 6 September 2019:

(i) calculate the amounts that were paid and that should have been paid for the hours worked by the Employee during the Employment Period;
(ii) make a payment to the Employee in the amount of the difference between what the Employee was entitled to be paid and what the Employee was actually paid during the Employment Period, and the superannuation payable to the Employee in respect of those amounts;
(iii) prepare a schedule outlining the amounts calculated and amounts paid to the Employee to remedy any underpayment identified;

(b) to produce reasonable evidence to the Applicant of its compliance with the Compliance Notice by 12 September 2019, by producing:

(i) a copy of the schedule referred to at paragraph 12(a)(iii) above; and
(ii) evidence that the outstanding amounts had been paid to the Employee and the outstanding superannuation contributions had been made to her superannuation Fund.

9. It is admitted that the First Respondent failed to comply with the compliance notice, as it did not take the specified action required by the compliance notice by 6 September 2019 and did not produce the relevant evidence to the Applicant by 12 September 2019.
10. The Second Respondent admits accessorial liability, within the meaning of s550 of the FW Act, as set out in [16] – [18] of the Notice to Admit. Based on payslips that were provided by the employees to FWI King and a partial assessment conducted by the Applicant of the employee’s underpayments, it was ultimately determined that for the period 15 July 2015 to 24 November 2018, the First Respondent underpaid the employee by at least a the sum of $11,679.78 (gross) on the basis of her entitlements under the award: see FWI King’s affidavit filed on 15 December 2020 at [8]. I accept that as a reasonable estimate of the underpayment.
11. On 18 December 2019, the Applicant initiated proceedings by way of an originating application.
12. On 29 July 2020, a notice of resolution was filed with the Australian Securities and Investment Commission on behalf of the First Respondent, stating that the company be wound up by way voluntary winding up under s491(1) of the Corporations Act and that a liquidator had been appointed.
13. On 6 November 2020, the Court received email correspondence from the Applicant, with the consent of the Second Respondent, informing the Court that the parties had reached agreement in relation to liability and that the parties had agreed to file a statement of agreed facts. On that basis, the parties proposed to proceed directly to a penalty hearing. Orders were made by consent as follows:

1. The directions hearing listed for 17 November 2020 at 9:30 am be vacated.
2. The Second Respondent is to file and serve a notice of address for service, including any email address for service by 6 November 2020.
3. The Parties file a statement of agreed facts by 27 November 2020.
4. The Applicant file and serve any affidavit evidence in respect of penalty by 18 December 2020.
5. The Second Respondent file and serve any affidavit evidence submissions in respect of penalty by 22 January 2021.
6. The Applicant file and serve any submissions in the respect of penalty by 12 February 2021.

14. In respect of those orders, a statement of agreed facts was filed on 27 November 2020. The Applicant also filed a further affidavit on 15 December 2020 and an outline of submissions on 12 February 2021. The Second Respondent did not file any material save for a notice of address for service.
15. The matter was heard on 16 April 2021 in relation to penalty. The Applicant was legally represented at the hearing. The Applicant advised the Court that the Second Respondent had sent them an email (a copy of which was provided to the Court) stating that he would not be attending the hearing. Reasons for Judgment were delivered ex Tempore at the conclusion of submissions. These are those reasons.

ORDERS SOUGHT

16. By way of annexure A to submissions filed on 12 February 2021, the Applicant seeks the following declarations and orders:

THE COURT DECLARES THAT:

1. The Second Respondent, by his involvement within the meaning of section 550 of the FW Act of the First Respondent’s failure to comply with the Compliance Notice, contravened section 716(5) of the FW Act.

THE COURT ORDERS THAT:

2. Pursuant to section 546(1) of the FW Act, the Second Respondent pay a pecuniary penalty to the Commonwealth for the contravention set out in paragraph 1 above within 28 days of this order.
3. Pursuant to section 546(3) of the FW Act, the Applicant may remit, at its discretion, the pecuniary penalty paid to the Commonwealth in accordance with paragraph 2, to the Employee to partially remedy the direct effects of the Contraventions.
4. The Applicant have liberty to apply in the event the orders are not complied with.

17. The Second Respondent has not filed material in relation to orders he seeks, or made submissions in respect of pecuniary penalty.

CONSIDERATION

18. The Applicant has filed and served submissions on penalty. A declaration is sought in relation to a contravention of s716(5) of the FW Act arising from the failure of the First Respondent, and by way of accessorial liability the Second Respondent, to comply with the compliance notice issued by the Applicant. Further, pursuant to s546(1) of the FW Act, the Applicant is seeking the imposition of a pecuniary penalty against the Second Respondent in relation to the admitted contravention.
19. I accept the evidence and admitted facts have established that the Second Respondent had actual knowledge of the factual matters which comprised the admitted contravention. I also accept that the Second Respondent was the sole director of the First Respondent, and was the person responsible for the overall operation, management, and control of the First Respondent. The Second Respondent admits to being responsible for ensuring that the First Respondent complied with its legal obligations under the Fair Work Act.
20. The Applicant submits that a penalty in the range of $3,402 to $3,969 in respect of the Second Respondent for the admitted contravention is appropriate. That range represents 60% to 70% of the maximum penalty able to be imposed, as well as a 10% discount for cooperation by the Second Respondent. The maximum penalty is 6,300.
21. I think it is relevant in this case that there has been very little engagement by the Second Respondent in the investigation process or in the proceeding generally. He has not appeared in Court throughout these proceedings, and does not appear today to make submissions. The sum of $11,679.78, which I referred to earlier, is a significant amount of money for the casual employee who was affected by the underpayments. There is no evidence that the underpayments have been rectified.
22. Further, by way of her affidavit filed on 15 December 2020, FWI King gives evidence of the very large or very significant number of complaints that are made to the Applicant arising from employment in the accommodation and food services industry. FWI King states at [12] that:

12. The Industry Report summarises data for the period July 2014 to June 2020 (Industry Report Period) regarding compliance with workplace laws in the accommodation and food services industry. I have accessed and reviewed the Industry Report and among other things, have identified the following findings:

(a) during the Industry Report Period:

(i) the FWO completed 22,277 physical or online requests for assistance (Dispute Forms) from workers in the accommodation and food services industry, which represents 16.7% of all Dispute Forms completed by the FWO;
(ii) 21 % of all Disputes Forms completed by the FWO involved an underpayment of minimum hourly rates of pay; and

(b) 38.2% of all Compliance Notices issued by the FWO in the period July 2019 to June 2020 were issued to employers within the accommodation and food services industry for non-compliance with Commonwealth workplace laws.

23. Those comments are supported by Annexure ‘MMK-3’, titled ‘Fair Work Ombudsman Industry Profile and FWO Interactions: Accommodation and Food Services’ which is the Industry Report referred to by FWI King. Plainly, underpayment of employees in that industry are a significant issue and is something that I take into account.
24. In my view, this is a case where both specific and general deterrence is appropriate. In terms of general deterrence, I refer to the evidence set out above in relation to the apparent widespread problem of underpayments in this sector. In terms of specific deterrence, there is no evidence before me as to any prior history involving the Respondents and there is no evidence as to whether Mr Williams continues to be engaged in the sector.
25. I have regard to a non-exhaustive list of factors relevant to the imposition of a penalty was usefully summarised by Mowbray FM (as he then was) in Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 at [26] to [59]. Those factors include:

(1) the nature and extent of the conduct which led to the breaches;
(2) the circumstances in which that conduct took place;
(3) the nature and extent of any loss or damage sustained as a result of the breaches;
(4) whether there had been similar previous conduct by the Respondents;
(5) whether the breaches were properly distinct or arose out of the one course of conduct;
(6) the size of the business enterprise involved;
(7) whether or not the breaches were deliberate;
(8) whether senior management was involved in the breaches;
(9) whether the party committing the breach had exhibited contrition, taken corrective action and co-operated with the enforcement authorities;
(10) the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
(11) the need for specific and general deterrence.

26. This summary was adopted by Tracey J in Kelly v Fitzpatrick [2007] FCA 1080 at [14]. While the summary is a convenient checklist, it does not prescribe or restrict the matters which may be taken into account in the exercise of the Court’s discretion: see Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550. The discretion remains at large.
27. As to the lack of contrition, corrective action or cooperation, I note that that the Second Respondent has cooperated to the extent that he has made full admissions, which are set out in the agreed statement of facts. However, he did not cooperate in the process which was commenced through the service of the compliance notice by the Applicant and he has not attended Court throughout these proceedings. I note that there is a submissions that the Second Respondent did not respond to any of the Applicant’s correspondence or answer any of the Applicant’s calls while the proceeding has been on foot and failed to attend directions hearings held on 24 February 2020 and 27 April 2020.
28. In my view, it is important that a penalty be imposed such as to discourage conduct of a similar kind by similar actors within the industry and to that end I find that a pecuniary penalty in the sum of $3,500, to be imposed against the Second Respondent, is appropriate.
29. Pursuant to s546(3), the Court has a discretion to order that any pecuniary penalty, or a part of the penalty, be paid to a particular person including an employee. The Applicant has submitted that it is appropriate in the circumstances that any penalty that the Court may order against the Second Respondent be paid to the employee. The Applicant submits at [64] – [66] of their submissions filed on 12 February 2021 that this is the appropriate approach as it otherwise unlikely that the employee will be able to recover the amounts owing to her, being $11,679.78, pursuant to the award. This is because:

(1) the First Respondent is no longer trading and is in liquidation;
(2) due to the operation of s471B of the Corporations Act, the Applicant is precluded from seeking an order from the Court that the First Respondent take the steps required to comply with the Compliance Notice (which includes the rectification of underpayment to the Employee); and
(3) the Second Respondent has not otherwise made any attempts to comply with the Compliance Notice and rectify any outstanding amounts owed to the employee.

30. I agree with that submission and I will order accordingly.

CONCLUSION

31. For these reasons, I will impose a penalty in the total sum of $3,500.00 as against the Second Respondent, pursuant to s546(1) of the FW Act. I will also make an order for that amount to be paid to the Commonwealth, with the Commonwealth to remit that amount to the employee, pursuant to s546(3) of the FW Act.

I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment of Judge McNab.

Associate:

Dated: 19 April 2021