Fair Work Ombudsman v Chen [2025] FedCFamC2G 1430

Note: The Court may vary or set aside a judgment or order to remedy minor typographical, clerical or grammatical errors (r 24.04(g) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2025 (Cth), or to record a variation to the order pursuant to r 24.04 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2025 (Cth).

1. The Applicant (FWO) seeks a declaration that the Respondents contravened s 716(5) of the Fair Work Act 2009 (Cth) (FW Act) by failing to comply with a compliance notice (Compliance Notice). The FWO also seeks orders that the Respondents take steps to comply with the Compliance Notice by making calculations and payments regarding outstanding entitlements said to be owed to specified employees. Penalties are additionally sought.
2. The parties have agreed upon the proposed orders that they seek for the Court to make by consent, including on the issue of penalties. For the following reasons, I will make the orders that have been proposed by the parties.

1. The FWO commenced the current proceeding through an Application and Statement of Claim filed on 6 September 2024.
2. On 22 November 2024, the FWO filed an application for default judgment on the basis of non-compliance by the Respondents with the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (GFL Rules) and Court orders. Before that application was heard, the parties proposed consent orders contemplating the filing of a Statement of Agreed Facts. Those orders were made on 22 January 2025. A Statement of Agreed Facts was filed on 30 April 2025 (SOAF).
3. Submissions and evidence have been filed by the FWO. The parties have sought that the matter be determined on the papers.

1. The following background, agreed between the parties, is taken from the SOAF.
2. On or around 18 April 2023, Fair Work Inspector (FWI) Charles Ford (FWI Ford) began an investigation (Investigation) into the partnership of the Respondents (Partnership).
3. Based on information obtained during the Investigation, FWI Ford formed a reasonable belief that:

(a) the Partnership was in the "restaurant industry", in accordance with cls 4.1(a) and 4.2 of the Restaurant Industry Award 2020 (Award), at all relevant times during the period between 28 June 2021 and 30 April 2023 (Audit Period);

(b) during the Audit Period, the Partnership employed certain employees in particular roles set out in the SOAF (Employees);

(c) by reason of the duties the Employees performed, they were within classifications defined in Schedule A - Classification Structure and Definitions of the Award as specified in the SOAF;

(d) the Award covered and applied to the Partnership in respect of the employment of the Employees; and

(e) the Partnership did not pay the Employees the applicable minimum hourly rates that were payable under the Award for hours they worked during the Audit Period.

1. By reference to the above, FWI Ford formed a reasonable belief for the purposes of s 716(1)(b) of the FW Act that the Partnership contravened specified terms of the Award in respect of the Employees' employment during the Audit Period (the Contraventions).
2. On 25 August 2023, FWI Ford gave the Partnership the Compliance Notice, together with a covering letter.
3. In accordance with s 716(2) of the FW Act, the Compliance Notice required the Partnership to:

(a) by 27 October 2023, take specified action to remedy the direct effects of the Contraventions (Specified Action), including:

(i) calculating and paying the outstanding amounts owed to each of the Employees in respect of each Contravention (Underpayment Amounts);

(ii) calculating additional superannuation contributions required to be paid by cl 22.2 of the Award in respect of the Underpayment Amounts and paying such contributions to each Employee's chosen superannuation fund (Superannuation Contributions);

(iii) making records of the amounts calculated and paid as referred to above (Underpayment Rectification Information); and

(b) by 3 November 2023, producing reasonable evidence to the FWO of the Partnership's compliance with the Compliance Notice by producing a copy of the Underpayment Rectification Information and proof that full payment had been made to each of the Employees and their chosen superannuation funds.

1. Between 25 August 2023 and 19 February 2024, FWI Ford was directly in contact with the First Respondent (Mr Chen) and authorised representatives of the Partnership on a total of approximately 55 occasions to discuss, encourage and facilitate the Partnership's compliance with the Compliance Notice.
2. The FWO contacted the Partnership on the following occasions regarding the Partnership's failure to comply with the Compliance Notice:

(a) On 6 November 2023, FWI Ford emailed Mr Chen and a representative of the Partnership attaching a Failure to Comply Letter. The email and Failure to Comply Letter provided the Partnership with a further 9 days to provide evidence of compliance with the Compliance Notice or a reasonable excuse for not complying.

(b) On 15 November 2023, FWI Ford emailed Mr Chen and a representative of the Partnership notifying them that the Compliance Notice required evidence of compliance to be provided to the FWO by 15 November 2023, and that, in the event that the FWO did not receive such evidence by close of business on 15 November 2023, the FWO may commence legal action against the Partnership without further notice.

1. Between 6 November 2023 and 26 February 2024, a representative of the Partnership communicated with FWI Ford to demonstrate the Partnership's partial compliance with the Compliance Notice. In this regard:

(a) on specified dates, calculations were provided regarding the sum of the Underpayment Amounts owing to certain Employees;

(b) on specified dates, the Partnership took the Specified Action in part by paying certain Employees certain amounts; and

(c) on specified dates, reasonable evidence was produced to the satisfaction of the FWO that certain payments had been paid to certain Employees.

(a) take the Specified Action set out in the Compliance Notice in respect of all of the Employees by 27 October 2023;

(b) take the Specified Action set out in the Compliance Notice at all in respect of certain Employees (Outstanding Employees);

(c) produce reasonable evidence to the FWO of compliance with the Compliance Notice by 3 November 2023; and

(d) produce reasonable evidence to the FWO of compliance with the Compliance Notice at all in relation to the Outstanding Employees.

1. The Partnership therefore failed to comply with the Compliance Notice in contravention of s 716(5) of the FW Act.

1. The principles regarding imposition of penalties were considered by the High Court in Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; (2022) 399 ALR 599 (Pattinson). There, it was stated that "the purpose of a civil penalty is primarily, if not solely, the promotion of the public interest in compliance with the provisions of the Act by the deterrence of further contraventions of the Act" at [9] per Kiefel CJ, Gageler J (as his Honour then was), Keane, Gordon, Steward and Gleeson JJ. The "real task" of the Court was therefore described as "fixing the penalty which it considers fairly and reasonably to be appropriate to protect the public interest from future contraventions of the Act" (at [71]).
2. A number of potentially relevant considerations have been identified in cases such as Trade Practices Commission v CSR Ltd [1990] FCA 762; [1991] ATPR 41-076 at [42]; Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner (The Non-Indemnification Personal Payment Case) [2018] FCAFC 97; (2018) 264 FCR 155 at [20] and Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7. However, it is to be borne in mind that such recitations of potentially relevant considerations are not to be used as if they "were a legal checklist": Pattinson at [19]. The Court's task is to determine the appropriate penalty or penalties by reference to the particular circumstances of each case.
3. Bankruptcy does not preclude the imposition or recovery of a pecuniary penalty: s 82(3) of the Bankruptcy Act 1966 (Cth); Fair Work Ombudsman v Baal Gammon Copper Pty Ltd [2021] FCCA 348 [32] (Judge Jarrett).
4. It is open to parties to make submissions regarding appropriate penalty ranges, including by agreement. The Court is nonetheless required to satisfy itself that the submitted penalties are appropriate.
5. However, where the agreed penalties proposed are within an appropriate, permissible range the Court will not depart from the agreed upon figure _"_merely because it might otherwise have been disposed to select some other figure": Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482 (Director) at [47]-[48] per French CJ, Kiefel J (as her Honour was) and Bell, Nettle and Gordon JJ. Provided that the proposed settlement is based upon an accurate account of the circumstances and appropriate, it has been recognised that it is "highly desirable in practice for the court to accept the parties' proposal and therefore impose the proposed penalty": Director at [58].

1. Pursuant to ss 539(2) and 546(2)(a) of the FW Act, the maximum penalty that the Court may impose is $9,390 in relation to each of the Respondents.
2. It has been held that the maximum, whilst a relevant consideration, does not constrain the exercise of discretion under s 546 beyond requiring "some reasonable relationship between the theoretical maximum and the final penalty imposed": Pattinson at [10]. This "relationship is established where the maximum penalty does not exceed what is reasonably necessary to achieve the purpose of s 546: the deterrence of future contraventions of a like kind by the contravenor and by others": Pattinson at [10].

(a) the Application and Statement of Claim (Originating Documents);

(b) an affidavit of Sarah Gonski, affirmed on 22 November 2024 (SG Affidavit);

(c) an affidavit of FWI Ford, affirmed on 22 November 2024 (CF Affidavit); and

(d) a further affidavit of Sarah Gonski, affirmed on 12 May 2025 (SG Supplementary Affidavit).

1. No evidence was filed on behalf of the Respondents.

Circumstances surrounding the contravention and extent of loss

1. The circumstances surrounding the contravention are set out in some detail by reference to the SOAF above.
2. As set out above, the Respondents accept failure to comply with the Compliance Notice. This was in circumstances where the Respondents admit that if they had complied with the Compliance Notice, they would have been required to pay a number of employees sums of money: SOAF at [11] to [14].
3. The Respondents have not provided any evidence regarding the circumstances in which the contravention was said to have occurred. Although reference was made by Mr Chen in an email to the FWO regarding a "cash flow situation" (Annexure SG-S1 to the SG Supplementary Affidavit), no clear evidence of this has been provided.
4. FWO submitted, by reference to the evidence, that:

(a) the Respondents were on notice of the Compliance Notice and the obligation to comply with it, including potential consequences of non-compliance: SOAF at [8] to [12];

(b) the Respondents did not comply with the terms of the Compliance Notice despite contact made by the FWO on approximately 55 separate occasions in a period from August 2023 to early 2024: SOAF at [11];

(c) despite being afforded ample time and multiple opportunities to comply with the Compliance Notice and avoid litigation, the Responents failed to comply with the Compliance Notice in full: SOAF at [11] to [16];

(d) as a result of the Respondents' failure to comply with the Compliance Notice, the FWO was required to bring proceedings.

1. I accept, based upon the SOAF, that the above circumstances surrounded contravention of s 716(5) of the FW Act.
2. The FWO submits that the Respondents' failure to comply with the Compliance Notice demonstrates a disregard for their obligations under the FW Act and the authority of the FWO as a regulator of Commonwealth workplace laws. The FWO further observes that both the FWO and the Court have been required to spend time and public resources in dealing with this proceeding that would not have been required had compliance occurred.
3. I accept that some level of disregard has been shown by the Respondents through their dealings with the FWO. I also accept that there have been costs associated with the Respondents' actions, including public cost, on account of the non-compliance. Although costs have been mitigated, to some extent, through the Respondents' actions towards partial compliance with the Compliance Notice and entry into the SOAF, the Respondents accept that full compliance with the Compliance Notice did not occur and that payments to Employees remain outstanding. Entry into the SOAF only occurred after proceedings had commenced and an application for default judgment had been made.
4. I have taken these matters into account in determining penalties.

Size and financial circumstances of the business

1. The size and financial circumstances of a business may be relevant in determining penalties where appropriate evidence is put forward. This needs to be weighed against the need for general deterrence, which is a consideration of greater force: see Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; (2008) 168 FCR 383 at [69] (Stone and Buchanan JJ). Size of a business does not excuse non-compliance with obligations under the FW Act: Fair Work Ombudsman v Althaus Homes Pty Ltd [2021] FCCA 126 at [35] (Jarrett J). As the FWO observed, Judge Jarrett's remarks in Fair Work Ombudsman v Extrados Solutions Pty Ltd [2014] FCCA 815 at [10] have application:
   1. The obligation to comply with the Fair Work Act and, in particular, s.716 falls just as heavily on small corporations and small businesses - and individuals, for that matter - as it does on large employers or businesses. Put shortly, one cannot shirk one's responsibilities imposed by law simply because one might be described as a "small business", or because the business has a particular size. It is incumbent on all employers to comply with the requirements of the Fair Work Act.
2. To similar effect, in Kelly v Fitzpatrick [2007] FCA 1080; (2007) 166 IR 14 Tracey J observed at [28]:
   1. ... 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": see Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd [2001] FCA 383; [2001] ATPR 41-815 at [13].
3. In the present case, the evidence does not establish the size of the business or its financial circumstances in any detail. As noted above, although reference has been made to a "cash flow situation", no clear evidence in this regard has been provided. In any event, as the FWO submitted, the financial position of the business provides no excuse for failure to comply with the FW Act.

Cooperation, contrition and corrective action

1. As set out above, the Respondents have partially complied with the requirements of the Compliance Notice. However, the Respondents acknowledge that full compliance has not occurred. Underpayment Amounts acknowledged to be owing to certain Employees have not been paid.
2. The Respondents have admitted the contraventions and entered into the SOAF, thereby avoiding further costs associated with a fully contested hearing. However, as the FWO observed, this only occurred after the commencement of litigation and some perseverance on the part of the FWO. It was also after an initial lack of engagement by the Respondents with the proceeding, resulting in the FWO expending resources in applying for default judgment: SG Affidavit at [12]-[24]; SG Supplementary Affidavit at [7]-[20].
3. I accept the FWO's submission that cooperation by the Respondents, including through the SOAF, ought to be given appropriate weight in considering the issue of penalties. However, I also accept the FWO's submission that the weight that ought to be given to this is impacted by the fact that there are still outstanding steps required by the Compliance Notice regarding the calculation and payment of entitlements. I also accept that it may be inferred that steps towards rectification may not have been taken without the FWO's pursuit of this proceeding and that the entry into the SOAF may have been an acceptance by the Respondents of the "inevitable": see Fair Work Ombudsman v Matcraft Pty Ltd [2021] FCCA 272 at [78] (Judge Kendall).
4. The FWO submits that a discount of 10% should be applied on account of the Respondents' admissions and cooperation. I prefer to consider the question of penalties in this matter holistically, rather than by reference to such a percentage. This is in circumstances where there is potential overlap between the considerations that may inform the Court's reasoning under a number of headings.

The need to ensure compliance with minimum standards

1. The FWO submitted that a failure to comply with a statutory notice is serious. Failure to comply undermines the FW Act's enforcement framework and the safety net of entitlements it is designed to protect: Fair Work Ombudsman v Tester [2021] FCCA 771 at [27] (Judge Jarrett). The efficacy of statutory notices would be hindered or made redundant if the recipients perceive that failure to comply will not carry meaningful consequences: Fair Work Ombudsman v Nobrace Centre Pty Ltd & Anor (No.2) [2019] FCCA 2144 (Judge Blake) at [40].
2. I accept these submissions and have taken them into account in determining penalties.

1. It has been repeatedly emphasised in penalty cases that general deterrence must serve a purpose that ensures any penalty imposed is not seen as "the cost of doing business": see for example Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290; (2016) 68 AILR 102-690 at [27] (Flick J). A penalty should therefore "be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like-minded persons or organisations": Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543 at [93] (Lander J).
2. The FWO has submitted a report titled "Fair Work Ombudsman Industry Profile and FWO Interactions Cafes and Restaurants" (Industry Report) summarising data for the period July 2020 to June 2023 regarding compliance with workplace laws in the restaurant industry (Industry): Annexure CF-13 to the CF Affidavit. Among other things, the Industry Report shows that from July 2020 to June 2023:

(a) a total of 15% of the contraventions in the Industry concerned wages and conditions; and

(b) the FWO issued a total of 1159 compliance notices to employers in the Industry between July 2020 to June 2023, being 17.5% of all compliance notices issued by the FWO.

1. I accept the significant role that the need for general deterrence plays in determining penalties. The penalties imposed in this matter should be sufficiently high to impress upon those in positions of responsibility the importance of complying with their legal obligations, and in particular the need to comply with statutory notices from the FWO.
2. I also accept that there is some need for specific deterrence in this case. There is evidence that the Respondents' business appears to be continuing to trade, with staff working for the business: SG Supplementary Affidavit at [24]. Although Mr Chen has become bankrupt, he has given inconsistent information to the FWO regarding his ongoing involvement with the business: SG Supplementary Affidavit at [23]-[24]. Mr Chen was the director of five companies prior to his bankruptcy and, on the most recent evidence, continued to be listed as a director of those companies: SG Supplementary Affidavit at [25]. It certainly seems possible that Mr Chen will have obligations under the FW Act in the future. I accept that there is also a need for specific deterrence in relation to the Second Respondent (Mr Du). This, as was submitted by the FWO, is in circumstances where:

(a) it is not apparent that Mr Du personally engaged with the FWO prior to the commencement of these proceedings;

(b) it is not apparent that Mr Du was involved in steps taken by Mr Chen to rectify (partially) non-compliance with the Compliance Notice: SG Supplementary Affidavit at [6];

(c) Mr Du did not file a notice of address for service until a number of months after the commencement of proceedings and after the FWO filed an application for default judgment;

(d) Mr Du appears to be continuing to operate the business and therefore to be responsible for ensuring compliance with workplace laws; and

(e) Mr Du appears to be a director and secretary of one other company: SG Supplementary Affidavit at [25].

1. By reference to matters considered above, the FWO submits that it would be appropriate to impose:

(a) a penalty of $4,563.54 on Mr Chen, being 60% of the maximum penalty with a 10% discount for cooperation and a further 10% reduction for totality; and

(b) a penalty of $5,915.70 on Mr Du, being 70% of the maximum penalty with a 10% discount for cooperation.

1. The FWO submits that Mr Chen's bankruptcy may be relevant to the totality principle. Some discount has been proposed on the basis of his financial position, to ensure that the penalty imposed is "not crushing".
2. The Respondents have consented to the penalties sought by the FWO.
3. I am satisfied that the penalty proposed in relation to Mr Chen is appropriate in the circumstances of this case as considered above. I am also willing to accept that the penalty proposed in relation to Mr Du may be regarded as falling within an "appropriate, permissible range": see Director at [47]-[48]. This is considering the Respondents' acceptance that full rectification has not occurred, as well as limitations in the evidence regarding Mr Du's contrition and/or steps personally taken towards cooperation and rectification.
4. Having regard to the above, I will order penalties in the amounts that have been proposed by consent.

1. As observed above, the parties have additionally proposed orders by consent:

(a) requiring that the Respondents take steps required by the Compliance Notice towards calculation and payment of outstanding entitlements; and

(b) requiring the payment of interest.

1. The FWO, for whatever reason, made no submissions of any detail regarding the appropriateness of the orders proposed. However, I accept that similar orders have been made in other cases: see for example, recently, Fair Work Ombudsman v Western Chinese Language School Incorporated (No 2) [2025] FedCFamC2G 1037 (Judge Champion), Fair Work Ombudsman v Rundle trading as Porkys Garage [2025] FedCFamC2G 994 (Judge Brown) and Fair Work Ombudsman v Ella Group (NSW) Pty Ltd [2025] FedCFamC2G 800 (Judge McCabe).
2. Having regard to the admissions made by the Respondents through the SOAF and material provided to the FWO, as well as the fact that the orders proposed are by consent, I am willing to make the orders proposed.

1. For the foregoing reasons, I will make orders requiring that the Respondents pay penalties in the amounts that have been agreed, as well as associated orders that have been agreed between the parties.

I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Laing.