Fair Work Ombudsman v McCrystal Agricultural Services Pty Ltd [2025] FedCFamC2G 1478

1. The First Respondent contravened section 323(1) of the Fair Work Act 2009 (Cth) ("the FW Act") by making the Alcohol and Drug Policy Deductions between 19 January 2022 and 22 March 2022, thereby failing to pay in full amounts payable to 29 Employees in relation to the performance of work.
2. The First Respondent contravened section 323(1) of the FW Act by making the Overtime Overpayment Deductions between 25 August 2021 and 31 August 2021, thereby failing to pay in full amounts payable to 28 Employees in relation to the performance of work.

1. The First Respondent contravened section 323(1) of the FW Act by making the Health Insurance Premium Excess Deductions between on or around 24 November 2021 and 29 March 2022, thereby failing to pay in full amounts payable to 27 Employees in relation to the performance of work.

1. The Second Respondent was involved, within the meaning of section 550(2) of the FW Act, in the First Respondent's contravention declared in Declaration A herein.

1. Pursuant to section 546(1) of the FW Act, the First Respondent pay a pecuniary penalty for contravening section 323(1) of the FW Act by making the Alcohol and Drug Policy Deductions between 19 January 2022 and 22 March 2022 (declaration A herein), fixed in the sum of $21,000.
2. Pursuant to section 546(1) of the FW Act, the First Respondent pay a pecuniary penalty for contravening section 323(1) of the FW Act by making the Overtime Overpayment Deductions between 25 August 2021 and 31 August 2021 (declaration B herein), fixed in the sum of $12,000.
3. Pursuant to section 546(1) of the FW Act, the First Respondent pay a pecuniary penalty for contravening section 323(1) of the FW Act by making the Health Insurance Premium Excess Deductions between on or around 24 November 2021 and 29 March 2022 (declaration C herein), fixed in the sum of $10,000.
4. Pursuant to section 546(1) of the FW Act the Second Respondent pay a pecuniary Penalty for his involvement, within the meaning of section 550(2) of the FW Act, in the First Respondent's contravention (declaration D herein), fixed in the sum of $5500.
5. Pursuant to section 546(3)(a) of the FW Act, all Pecuniary Penalties imposed on the First and Second Respondent pursuant to orders herein be paid to the Commonwealth of Australia within 28 days from the date of this order.

1. The Court will not provide a written version of the reasons for judgment delivered today, unless an appeal has been lodged or the Court has received a request in writing from either party seeking that written reasons be produced.

Note: The form of the order is subject to the entry in the Court's records.

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

1. The first respondent, McCrystal Agricultural Services Proprietary Limited, is a company that has engaged predominantly in operating a sweet potato farm at South Kolan, which is a township that is just outside Bundaberg, but certainly within the Bundaberg Magistrates Court area.
2. The company offers labour hire services for reward and is an approved employer under the Australian Government Seasonal Worker Program and the Pacific Labour Scheme, which have now been amalgamated into the Pacific Australia Labour Mobility ("PALM") scheme. Obviously, notwithstanding all of those things, the employees that are under its wings are covered by the Fair Work Act 2009 (Cth) ("the FW Act") and the modern Award.
3. The first respondent employed 66 employees from the Pacific Islanders and Timor-Leste. It did provide, and arrange, for worksite accommodation for each of the employees and obtained health insurance on behalf of each of the employees.
4. The company had the second respondent, Mr Russell McCrystal, as its, in effect, controlling mind.
5. There are three forms of contraventions that have been admitted to by the first respondent. The second and third contraventions are very easy to explain.
6. In order to understand the contraventions, it is necessary to note what the FW Act says about deductions. Whilst it is that an employer must pay the employee their full wage, an employer may deduct an amount from the amount payable to the employee,
   • firstly, if the deduction is authorised in writing and is principally for the employee's benefit;
   • secondly, if the deduction is authorised by the employee in accordance with an enterprise agreement;
   • thirdly, if the deduction is authorised by, or under, a modern Award or a Fair Work Commission order; and
   • fourthly, if it is authorised by, or under, a law of the Commonwealth, State or Territory, or an order of Court.
7. In that way, deductions, such as for PAYE tax, are authorised deductions. Deductions from wages to meet an order for things such as child support are authorised deductions.
8. Employees can ask for a number of deductions to be made out of the amount that is due to them as well.
9. With regard to the second contravention, what had occurred is that there were some 28 persons who had worked overtime and were paid for that overtime. An oversight, in the payments section of the first respondent, led to these 28 employees being overpaid their overtime entitlements. Once this error was detected, the company, without any regard, or notification, to the employees, simply deducted the amount of the overpayment from the next applicable pay cycle.
10. As can be ascertained very easily, that was not a deduction that was authorised under the FW Act. There was no permission or agreement in writing by the employees for that to happen, and obviously, this was not for the benefit of the employees at all, because this was done, really, in effect, without their knowledge.
11. The contravention of s 324 was complete. The first and second respondents do not quibble with this at all.
12. With regard to the third contravention, this had to do with the health insurance premium. When 27 particular workers had begun their employment with the first respondent, they had been quoted a premium of $21 per pay period to be spent for the health insurance premium. This was factored into the pay set-up, and the $21 was deducted from their pay.
13. It seems to me, on the evidence, that, between the arrangement of the employees to commence work and the actual time in which they commenced doing their duties, the health insurance provider had reduced their premiums to an amount of $18.50 per pay period, meaning that the deduction, that had been put in place, would be deducting an amount of $2.50 too much.
14. However, the employer still deducted this sum of $21 per week until it was that the mistake was discovered.
15. The amount unlawfully deducted for the overtime overpayment deduction for the 28 employees totalled $2548.60, and for the 27 employees involved in the health insurance premium deduction, totalled $1282.50.
16. The first contravention is the one that is the most controversial.
17. What had occurred in the past is that certain workers, who were not native to Australia, had engaged in out of work behaviour in which alcohol was consumed and then damage was caused to both private and public property. This situation was causing tensions within the community to rise.
18. On 24 August 2021, the first respondent, through the second respondent, issued a notice to its employees. It stated:

Effective today, we are bringing in the following disciplinary rules. The first instance of disobeying the above alcohol and drug policy will result in a $500 fine. The second instance of disobeying the alcohol and drug policy will result in termination of employment, and you will be returned home.

1. Between 19 January 2022 and 22 March 2022, there were deductions made in relation to 29 employees on the basis of breaches of the alcohol and drug policy. What would happen when a person was found to have breached the alcohol and drug policy? The employee would receive a letter from the second respondent, which stated:

As per the alcohol policy, a $500 fine is payable. Please sign the attached deduction form to pay this fine.

1. And they would sign the letter authorising the deduction. Now, obviously, those deductions were not principally for the benefit of the relevant employees, and those deductions were not otherwise authorised in accordance with s 324 of the FW Act.
2. Therefore, the first and second respondents were not entitled to make those deductions.
3. The total amount that was deducted because of this policy during that period was a total of $14,500. The total of all of these contraventions is $18,331.10.
4. The first respondent has remitted all those amounts and did so in a very timely manner. As I remarked, during the course of the hearing, these contraventions were contraventions that could not be the subject of the compliance notice provisions of s 713 of the FW Act. If they were, this matter would never have come to Court. But because that option was not available, the Fair Work Ombudsman really had no other option, having regard to these contraventions, other than to commence litigation, which it did on 25 September 2024.
5. The matter has, realistically, come through the Court very quickly, given that the Court had to ensure, firstly, that the question of liability had been sorted, and then, secondly, find a date for a hearing of the pecuniary penalty assessment. In that respect, there has been the full cooperation.
6. So now it is for this Court to assess what is the appropriate pecuniary penalty for these three contraventions. The law in relation to assessment of pecuniary penalties has been laid down quite comprehensively.
7. The High Court, in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3, said, at paragraph 116 of that judgment:

As has been observed, the principal object of an order that a person pay a pecuniary penalty under s 546 is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners. According to orthodox sentencing conceptions as they apply to the imposition of civil pecuniary penalties, specific deterrence inheres in the sting or burden which the penalty imposes on the contravener. Other things being equal, it is assumed that the greater the sting or burden of the penalty, the more likely it will be that the contravener will seek to avoid the risk of subjection to further penalties and thus the more likely it will be that the contravener is deterred from further contraventions; likewise, the more potent will be the example that the penalty sets for other would-be contraveners and therefore the greater the penalty's general deterrent effect. Conversely, the less the sting or burden that a penalty imposes on a contravener, the less likely it will be that the contravener is deterred from further contraventions and the less the general deterrent effect of the penalty. Ultimately, if a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so it will be unlikely, or at least less likely, to achieve the specific and general deterrent effects that are the raison d'être of its imposition.

1. The High Court reaffirmed that principle in the matter of Australian Building and Construction Commissioner v Pattinson [2022] HCA 13. The High Court said, at paragraph 46:

...It is important to recall that an appropriate penalty is one that strikes a reasonable balance between oppressive severity and the need for deterrence in respect to the particular case.

1. The penalty that is appropriate to protect the public interest by deterring future contraventions of the Act may also be moderated by taking into account other factors of the kind adverted to by French J in CSR. For example, where those responsible for a contravention of the Act express genuine remorse for the contravention, it might be considered appropriate to impose only a moderate penalty because no more would be necessary to incentivise the contraveners to remain mindful of their remorse and their public expressions of that remorse to the court. Similarly, where the occasion in which a contravention occurred is unlikely to arise in the future because of changes in the membership of an industrial organisation, a modest penalty may be appropriate having regard to the reduced risk of future contraventions.
2. It is not necessary to multiply examples further. It is sufficient to say that a Court empowered by s 546 to impose an "appropriate" penalty must act fairly and reasonably for the purpose of protecting the public interest by deterring future contraventions of the Act.

1. In Mason v Harrington Corporation Pty Ltd, trading as Pangaea Restaurant and Bar [2007] FMCA 7, which is known as the Pangaea case, the Court went through, in effect, a number of factors that the Court should be mindful of when imposing pecuniary penalties. One must be careful, though, in looking at the Pangaea case, that one does not simply look at those matters as some form of checklist to see whether or not the facts of the case with the particular factors either aggravate or mitigate the penalty.
2. As such, the list compiled in Pangaea is extremely useful, but it should not be a formula used by the Court to slavishly come up with some sort of almost mathematical guide for the imposition of penalties. Notwithstanding what the High Court said in Pattinson, Pangaea is still a useful guide for the Court.
3. The penalties that are to be imposed in this matter really can only be there to illustrate, not only the Court's denunciation of the behaviour, but to tell, not only this respondent that the conduct is not acceptable, but to deter the other like-minded employers. But as was said in Pattinson (Supra), there may very well be matters that mean that these circumstances will not be repeated.
4. The matters in the second and third part of the series of contraventions are matters where there really is very little that divides the submissions of the applicant and the submission of the respondents.
5. The applicant has asked for a penalty in relation to each of those matters of between $13,000 and $15,000. The respondent has said that there should be a penalty of $10,000 for the overtime and $5000 for the insurance premium deduction contravention.
6. Those contraventions could really be seen in the light of there being errors, and errors that were quickly fixed, notwithstanding that they are errors that really should not have been made in the first place and were errors that did affect the employees through absolutely no fault of their own.
7. For this reason, I have looked at all of the relevant factors and have seen the contrition and the steps taken by the first respondent so that there will not be a repeat of this sort of behaviour.
8. For the overtime payment deduction, I am of the view that a pecuniary penalty in the sum of $12,000 is an appropriate penalty, and for the insurance premium deduction, I am of the view that a penalty in the amount of $10,000 is the appropriate penalty.
9. The amount to be awarded for the first contravention is the one that the Court has had the most trouble ascertaining.
10. Mr McCrystal, the second respondent, swore an affidavit that was filed on 17 July 2025. In that affidavit, Mr McCrystal gives the background for the imposition of the drug and alcohol policy. He says, and I accept, that the policy was established following extensive meetings with the local police and business community, who were deeply concerned with the out of hours behaviour of the workers.
11. Mr McCrystal understood that a similar fine system had occurred in another case. He said that there were key local community figures that sought for stronger action to be taken by the company. He said that there were other business owners that were struggling to deal with the behaviour of an overseas workforce that had caused ongoing havoc in the local community and could pose not only a danger to the residents of the area, but also to tourism in the area.
12. The policy was introduced, according to Mr McCrystal, as a last resort to address significant ongoing issues, which included alcohol-related domestic violence, reckless crop and property damage, community endangerment and racial segregation in local licensing venues.
13. Mr McCrystal admitted that it was a measure that should have been considered further, but, he says, was nonetheless adopted in good faith in response to safety concerns raised by community members and other residents. He said that, at that time, he was getting no support from government or from the home countries of these workers in trying to manage this problem.
14. He said that the local community and employers had reached a breaking point at this time, but because "fine-based policies" had been implemented in the past with no problems, he still decided to implement the policy.
15. He said, now that the matter has been investigated by himself and his lawyers through the auspices of the Fair Work Ombudsman, he has realised that there was no authority under the FW Act to do what he did, and in making the deductions, he had contravened s 324.
16. He understands that all the bona fides in the world cannot excuse a contravention of this legislation. And he said that the "fine system" was only ever introduced as a measure of last resort and as a means of recovering for damage to property having been caused by the workers who were fined. It was never meant to be anything other than a deterrent to stop the misuse of alcohol within the working cohort of the company.
17. For this reason, I am of the view that it is an exceptional set of circumstances that really will not be repeated again. It is the sort of circumstances, that were described by the High Court, as deserving of a modest penalty, because it is an example of an occasion in which a contravention had occurred but was unlikely to arise in the future because of changes that have been made.
18. There have been changes, since that time, in that there is now a liaison officer with the Queensland Police Service who has the same or similar background to the workers and has allowed the company, therefore, to concentrate on its core business; that is, doing what it needs to do in the workforce to grow and harvest food, and to look after the workforce that enables such growing and harvesting to occur. The company itself is, now, not having to be the vanguard of ensuring appropriate behaviour of the workforce, and that aspect of the societal compact is now divorced from the industrial relations compact.
19. Whilst it has been said that a modest penalty may prevail, both the applicant and respondents have acknowledged this.
20. Notwithstanding that the amounts that the applicant and respondent have put forward as being that modest penalty are different, the principles behind both sets of submissions are ad idem in that regard.
21. There have been discussions on the issue of contrition. I understand that, from an industrial relations viewpoint only, why the Fair Work Ombudsman may submit that the issue of contrition is not as strong, and it seems to me that the submissions of the respondent cannot be divided into contrition on an industrial relations platform and contrition upon a social harmony platform. The company was, in my view, forced to take on a role that it should not have had to take on, and that being one of a supervisor, over its workers, out of hours.
22. But one can see how it is that this was needed to be done for the sake of the local community. It now does not have to be because of the use of the liaison officers.
23. But that does not mean that the company is not contrite for having contravened the Act. It does not mean that the company is somehow saying, "Well, we would do this again if we had to." I take it instead that the company is saying, "Well, we did what we had to do at that time to ease the community tensions that were happening, and unfortunately, the integrity of the Fair Work Act had to take second place to the need to keep social harmony." And one cannot divorce that from the industrial relations regime to solely look at the industrial relations regime when assessing contrition.
24. In the end, I am not sure that there really is that much of a great difference between the applicant and the respondents on that issue, but the Court does note the positions of both.
25. The other aspect that the Court has looked at is this aspect, that is, that the persons, or the 29 employees that were caught up in having deductions made for breaching the policy, were persons from countries where there is no such history of industrial relations.
26. Their countries are ones where the boss makes the rules, and everyone else has to obey. In that respect, it may be seen that these workers were vulnerable, and it is the remit of the Fair Work Ombudsman to protect the vulnerable workers in this country. No criticism can be made of the Fair Work Ombudsman for doing this, and no one can criticise the Fair Work Ombudsman for the exemplary way they have handled this case.
27. However, it is because of the relationship that those very same workers had with alcohol, and their inability to imbibe responsibly and to be good citizens when drinking alcohol, that has led to the need for such a policy. In many ways, these are two sides to the same coin.
28. Nevertheless, the Court has taken that aspect into account.
29. Going through all of the factors and especially having regard to what it is that the High Court has said in Pattinson (Supra), I am of the view that the appropriate penalty with regard to this particular contravention is a pecuniary penalty of $21,000.
30. That means that the total for the respondent to pay is a sum of $43,000 by way of pecuniary penalty.
31. Given Mr McCrystal's role in the matter, I would impose a pecuniary penalty in relation to contravention number 1 of $5500. Those sums are to be paid within the standard 28 days.

I certify that the preceding fifty-eight (58) numbered paragraphs are a true copy of the Ex tempore Reasons for Judgment of Judge Vasta.