Fair Work Ombudsman v Tac Pham Pty Ltd

Federal Court of Australia|2018-02-20|Before: Siopis J

The first respondent contravened the following civil penalty provisions: (a) section 45 of the Fair Work Act 2009 (Cth) (the FW Act), by contravening clause 20.1 of the Restaurant Industry Award 2010 (the Restaurant Award) by failing to provide the employees listed in paragraph 19 of the statement of agreed facts and admissions filed on 17 July 2017 (the SOAF) with the required minimum rate of pay under the Restaurant Award; (b) section 45 of the FW Act, by contravening clause 20.3 of the Restaurant Award by failing to provide the junior employee listed in paragraph 25 of the SOAF with the required minimum rate of pay under the Restaurant Award; (c) section 45 of the FW Act, by contravening clause 34.1 of the Restaurant Award by failing to provide the employees listed in paragraph 31 of the SOAF with the required Saturday penalty rates under the Restaurant Award; (d) section 45 of the FW Act, by contravening clause 34.1 of the Restaurant Award by failing to provide the employees listed in paragraph 36 of the SOAF with the required Sunday penalty rates under the Restaurant Award; (e) section 45 of the FW Act, by contravening clause 34.1 of the Restaurant Award by failing to provide the employees listed in paragraph 41 of the SOAF with the required public holiday penalty rates under the Restaurant Award; (f) section 45 of the FW Act, by contravening clause 34.2 of the Restaurant Award by failing to provide the employees listed in paragraph 46 of the SOAF above with the required late night penalty rates under the Restaurant Award; (g) section 45 of the FW Act, by contravening clause 24.2 of the Restaurant Award by failing to provide the employees listed in paragraph 52 of the SOAF with the required split shift allowance under the Restaurant Award; (h) section 536(2) of the FW Act, by failing to give a pay slip to each of the employees which included the information required by regulation 3.46(1) of the Fair Work Regulations 2009 (Cth); and (i) section 536(2) of the FW Act, by failing to give a pay slip to each of the employees which included the information required by regulation 3.46(5) of the Fair Work Regulations 2009 (Cth).

Pursuant to s 546(1) of the FW Act, each respondent is to pay the following pecuniary penalty in respect of their contraventions of the FW Act: (a) the first respondent - the sum of $37,500; and (b) the second respondent - the sum of $7,500.
Pursuant to s 546(3)(a) of the FW Act, all pecuniary penalties imposed be paid into the Consolidated Revenue Fund of the Commonwealth of Australia within 28 days of the date of this order.
Pursuant to s 545(1) of the FW Act, all persons engaged by the first respondent who have managerial responsibility for decisions regarding wages and conditions are, at the expense of the first respondent, to engage a suitably qualified compliance professional or legal practitioner with expertise in workplace relations law to conduct training, either jointly or individually, to occur within three months of the date of this order, in relation to compliance with: (a) wages and work-related entitlements under the Restaurant Award; (b) accrual and payment of entitlements under the National Employment Standards contained in Part 2-2 of the FW Act; and the first respondent is to notify the applicant in writing, within 7 days of the training, of the attendees and the name(s) of the person(s) who conducted the training.
The applicant has liberty to apply on 7 days' notice in the event that any of the preceding orders are not complied with. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

SIOPIS J: 1 The first respondent, Tac Pham Pty Ltd, has at all relevant times carried on business running a restaurant known as "Han's Café" in Rockingham, Western Australia. The second respondent is Mrs Cuc Thi Thu Pham, who is married to the director of the first respondent, Mr Thanh Tong Pham. Mrs Pham is the person who was responsible at the relevant time for the day to day management of the business and is a former director of the business. 2 At all material times, the first respondent was bound by the Restaurant Industry Award 2010 (the Restaurant Award) which regulated the conditions of employment between the first respondent and each of its employees. During the period 22 December 2014 to 20 December 2015, the first respondent employed a number of part-time employees, including junior employees, to work in the restaurant. Their conditions of employment were regulated by the Restaurant Award. 3 On 2 June 2017, the applicant, the Fair Work Ombudsman (the FWO), commenced proceedings in this Court claiming that the first respondent had: (a) contravened s 45 of the Fair Work Act 2009 (Cth) (the FW Act) by contravening a number of clauses of the Restaurant Award; and (b) contravened s 536(2) of the FW Act by failing to give a pay slip to each of the employees which included the information required by reg 3.46(1) and reg 3.46(5) of the Fair Work Regulations 2009 (Cth) (the FW Regulations). 4 More specifically, the FWO alleged that during the period 22 December 2014 to 20 December 2015, the first respondent contravened s 45 of the FW Act by contravening, at various times during the relevant period, the following clauses of the Restaurant Award: (a) cl 20.1 by failing to pay 13 employees the minimum rate of pay; (b) cl 20.3 by failing to pay one junior employee the minimum rate of pay; (c) cl 34.1 by failing to pay 10 employees Saturday penalty rates; (d) cl 34.1 by failing to pay 10 employees Sunday penalty rates; (e) cl 34.1 by failing to pay 19 employees public holiday penalty rates; (f) cl 34.2 by failing to pay eight employees late night penalty rates; (g) cl 24.2 by failing to pay 21 employees the split shift allowance. 5 As to the contraventions of s 536(2) of the FW Act, the FWO alleged that the first respondent failed to give each of the employees a pay slip which contained the information, required by reg 3.46(1) of the FW Regulations, which included: (a) the first respondent's name; (b) the date on which the payment to which the pay slip related was made; (c) any amount paid to employees that was a bonus, loading, allowance, penalty rate, incentive-based payment or other separately identifiable entitlement; and (d) the Australian Business Number of the first respondent. 6 Further, reg 3.46(5) of the FW Regulations required the pay slip also to include the amount of any superannuation contribution that the first respondent had made and the name and number of the fund to which the contribution was made. The FWO also alleged that the first respondent did not give the employees a pay slip which included all of that information. 7 By way of relief, the FWO claimed: (a) a declaration that the first respondent had contravened the FW Act in the respects alleged above, (b) a declaration that, pursuant to s 550 of the FW Act, the second respondent was involved in each of the contraventions by the first respondent, (c) an order that all persons engaged by the first respondent with managerial responsibility for wages and conditions undergo training, and (d) that a pecuniary penalty be imposed on each of the first respondent and the second respondent. 8 On 17 July 2017, a statement of agreed facts and admissions for the purposes of s 191 of the Evidence Act 1995 (Cth) was filed by the parties. By that statement each of the respondents admitted the contraventions of the FW Act alleged against each of them and agreed that the orders sought by the FWO should be made. Thus, the only outstanding matter between the parties was the amount of the penalty to be imposed on each respondent. 9 I am content on the basis of the agreed facts and admissions and the consent of the parties to make the declarations sought by the FWO. I am also content to make the training order sought by the FWO. 10 On 5 December 2017, there was a hearing before the Court at which the parties adduced evidence and made submissions as to the appropriate penalty which should be imposed on each of the respondents.

THE EVIDENCE 11 The respondents relied upon three affidavits. There was no cross-examination on the affidavits.

Mr Pham's affidavit of 25 August 2017 12 The first was an affidavit dated 25 August 2017 by Mr Pham, the husband of the second respondent and the director of the first respondent. The other two affidavits were made by the second respondent. The affidavits are dated 25 August 2017 and 3 October 2017 respectively. 13 The applicant objected to paras 33, 49, 50, 51 and annexure TP3 of Mr Pham's affidavit dated 25 August 2017. The respondents conceded the objections and, consequently, those paragraphs were not read. Further, the respondents did not read para 38 of Mr Pham's affidavit. 14 The FWO objected to para 35, 51, 52, 53 and annexure CP3 of the second respondent's affidavit dated 25 August 2017. The respondents conceded the objections and, consequently, those paragraphs were not read. 15 Mr Pham deposed that he migrated to Australia from Vietnam in June 2006. At that time he was 30 years old and did not know a "single word of English". 16 Mr Pham said that in 2008 he learnt of the opportunity to acquire a franchise of Han's Café in Rockingham, Western Australia, which he took up. He said that the cost of opening the restaurant was $600,000 and he borrowed the full amount from the franchisor. 17 Mr Pham said that he must have spent about one or two weeks training at the franchisor's Carousel restaurant in Cannington, Western Australia, as his orientation to taking up the Rockingham franchise. Other than that orientation, said Mr Pham, there was no system in place for any training from the franchisor. 18 Mr Pham said that Ms Tram, who was the wife of Mr Ian Han, the owner of the franchise chain, was his primary point of contact in relation to the business operation of the Han's Café Rockingham restaurant. Mr Pham said that when he asked Ms Tram how much he should pay the staff and what the minimum wage was, she told Mr Pham that the minimum wage was approximately $15 an hour. Mr Pham said that the franchisor had provided an Excel spreadsheet for him to work out how much he should pay the employees. He said he would input the hours each of the employees worked into the Excel spreadsheet, and it would automatically multiply the rate using built in formulas. 19 Mr Pham said that he would check the minimum wage applicable in Perth every now and again. He said he did this by conducting a Google search using the words "minimum wage". Mr Pham said that he did not seek advice from professionals on this issue and he relied on the search results from the internet. 20 Mr Pham went on to say that on 30 November 2016, he received an email from the FWO advising that the FWO was investigating alleged contraventions of the FW Act and the Restaurant Award which included, but was not limited to, an investigation of the payment of minimum wages and penalty rates. 21 Mr Pham said that in June 2017 he paid each of the employees the amount that they had been underpaid. Mr Pham said that he felt shameful for what he had done and he apologised to his employees and explained to them that he had underpaid them. The total of those repayments, said Mr Pham, was almost $28,000. 22 Mr Pham also dealt briefly with the financial position of the first respondent. He said that the first respondent's financial performance had dropped from 2015. Mr Pham also annexed the financial report for the year ended 2016 which showed that the first respondent had suffered a loss for that financial year of approximately $33,000. Mr Pham went on to say that he had used his income from other businesses that he operated to cover the loss suffered by the first respondent.

The second respondent's affidavit of 25 August 2017 23 The second respondent read an affidavit dated 25 August 2017. This affidavit was mutatis mutandis in almost identical terms to the affidavit of Mr Pham dated 25 August 2017. 24 The second respondent added to the statements made in Mr Pham's affidavit that before the first respondent acquired the Hans Café she had learned basic English but depended very much on her son, Tony, to translate for her. The second respondent also said that she had voluntarily participated in an electronically recorded interview with the Fair Work inspectors on 7 December 2016. 25 The respondents also read a second affidavit of the second respondent dated 3 October 2017. I will refer to that affidavit later in these reasons for judgment. Affidavit of Ms Gowri Suppiah of 22 September 2017 26 The FWO read an affidavit of Ms Gowri Suppiah dated 22 September 2017. Ms Suppiah holds the position of Fair Work inspector and is employed by the FWO. 27 Ms Suppiah deposed that on 26 February 2016, she took over the day to day conduct of an investigation being carried out by the FWO into whether the first respondent was meeting its obligations under the Restaurant Award to pay the minimum rate of pay and penalty rates to its employees. 28 Ms Suppiah exhibited correspondence between the FWO and the first respondent in relation to the investigation. That correspondence showed the following. 29 On 21 December 2015, a Fair Work inspector wrote to the first respondent to advise that it had been selected for inclusion in an education and compliance campaign conducted by the FWO in Western Australia. In that letter, the inspector requested that by the close of business on 18 January 2016, the first respondent provide the FWO with the following documents: (a) a completed entity information form, (b) specified employee time and wages records, and (c) a copy of the first respondent's franchise agreement. 30 The first respondent did not provide the requested documents by 18 January 2016, nor did the first respondent contact the FWO in relation to the request to produce documents. 31 On 21 January 2016, the FWO sent to the first respondent, by registered post, a Notice to Produce Records or Documents pursuant to s 712 of the FW Act. This notice required the first respondent to produce specified documents spanning 10 categories to the FWO by 8 February 2016. 32 The first respondent did not produce the documents in response to that notice to produce documents by 8 February 2016. 33 By 26 February 2016, the first respondent had still not produced the documents. On that day, Ms Suppiah spoke to the second respondent by telephone and said words to the effect that the documents needed to be produced by 2 March 2016. 34 On 3 March 2016, Ms Suppiah met with the second respondent at the Perth office of the FWO. At that meeting, the second respondent handed to Ms Suppiah certain selected documents. These included a document entitled "Total Salary from 22.12.14 to 20.12.15" and a sample of documents showing total payments made to individual employees for the period 22 December 2014 to 20 December 2015. 35 On 30 November 2016, an inspector advised the second respondent and Mr Pham, on behalf of the first respondent, that the FWO was investigating the first respondent for alleged contraventions of the FW Act, the FW Regulations and the Restaurant Award. In that email, the inspector offered the second respondent and Mr Pham the opportunity to participate in a record of interview about the allegations. 36 On 12 December 2016, Ms Suppiah and another inspector conducted an interview with the second respondent. Also present at the interview was the second respondent's daughter and a Vietnamese interpreter on the telephone. 37 On 25 January 2017, Ms Suppiah sent a letter by registered post to Mr Pham, as director of the first respondent, and a copy of the letter to the second respondent by email. This letter disclosed the findings of the audit which the FWO had undertaken of the first respondent's compliance with the FW Act, the FW Regulations and the Restaurant Award. In summary, the findings were that the first respondent had contravened the FW Act, the FW Regulations and the Restaurant Award in relation to the employment of 25 persons and owed a total of $30,360.15 in unpaid wages and entitlements to those persons. 38 The letter also requested that the first respondent pay the 25 employees identified in the letter, the amounts of underpayment identified in the letter and provide evidence of the payment to Ms Suppiah by 10 February 2017. 39 Ms Suppiah received emails from the second respondent on 10 February 2017, which provided evidence that payments to rectify the underpayments had been made to 23 of the 25 employees. Later, on 19 April 2017, Ms Suppiah received an email from the second respondent showing that the entitlements due the other two employees had been paid. 40 Ms Suppiah also produced documentation which evidenced a previous dealing between the FWO and the respondents. The documentation showed the following. 41 In 2013, the FWO had received a complaint from Ms Amanda Guest in respect of her employment with the first respondent. Ms Guest alleged that she had been underpaid her wages and that there had been a failure to provide pay slips. 42 An inspector had spoken to the second respondent by telephone on 5 November 2013 and told the second respondent that Ms Guest appeared to be covered by the Restaurant Award and that casual employees had to be paid a loading and penalty rates for work at weekends. The inspector also told the second respondent that pay slips had to be issued to employees when each was paid; and that the second respondent could contact the FWO information line to check award rates and conditions and that the complaint would be referred to mediation. 43 On 5 November 2013, the FWO emailed to the second respondent a copy of Ms Guest's complaint and a hyperlink to, inter alia, the FWO's "Paycheck Plus" tool. Ms Suppiah deposed that the Paycheck Plus tool was a tool available on the FWO's public website at the time which assisted users to calculate wages. The tool allowed users to select the applicable award and calculate base rates of pay, allowances and penalty rates for a particular classification. 44 Ms Guest's complaint was ultimately resolved via mediation. 45 Further, Ms Suppiah's affidavit also attached company and property searches in respect of the first respondent, Mr Pham and the second respondent. 46 The company searches showed that as at 7 September 2017, the second respondent was a director, secretary and shareholder of four companies, namely:

Happy Nails Salon & Spa Pty Ltd,
Mimosa (WA) Pty Ltd,
Regal Nail Designs Pty Ltd, and
WA Nails & Beauty Supply Pty Ltd. 47 The property searches showed that Mr Pham and the second respondent were joint owners of six properties located respectively at Princess Road, Balga; Diamantina Way, Rockingham; Stuart Place, Rockingham; Frost Way, Eaton; Beenyup Road, Banjup and Mitchell Street, Ardross. The property searches also showed that each of the properties was subject to a mortgage in favour of the Commonwealth Bank of Australia. The searches also appeared to show that the second respondent was the sole owner of a property in Light Street, Dianella. 48 Ms Suppiah also annexed a report from the FWO based on research undertaken by the FWO. The report showed that during the financial years 2013 to 2016, the restaurant/café industry had generated the most number of dispute lodgements to the FWO of any industry; and that the work force in that industry tended to be, on average, young, with less education, lower paid, employed part-time with higher levels of culturally and linguistically diverse backgrounds. The research also speculated that employment within that industry would increase by 12% during the years leading up to 2020.

The second respondent's affidavit of 3 October 2017 49 In response to the affidavit from Ms Suppiah, the second respondent filed an affidavit dated 3 October 2017. The respondents read that affidavit. 50 The second respondent deposed that she did not recall the complaint made by Ms Guest and she did not recall who she was, nor the mediation which is referred to in Ms Suppiah's affidavit. 51 The second respondent also said that she did not respond to the requests in late 2015 and early 2016 by the FWO to produce documents within the time limits because of her poor command of English and her hesitancy to use electronic transmission because she was not proficient in the use of such technology. The second respondent said that when she understood what she had to provide, she provided the documentation without hesitation. 52 As to the properties referred to in Ms Suppiah's affidavit, the second respondent denied that she was the owner of the property at Light Street, Dianella but she accepted that she and her husband owned jointly all the other properties. 53 Mrs Pham also deposed that the Stuart Place property is actually held on trust for her sister, who meets all the payments in respect of the property. 54 The second respondent also said that the repayments on the mortgages were financed by the income generated from what she referred to as her "three nail businesses". The second respondent also said that she has a successful family company in Vietnam from which she had sourced the funds to assist in purchasing the properties mentioned above.

The number of contraventions 55 The parties have agreed that the contravening conduct should be treated as having given rise to a total of nine contraventions - seven contraventions of s 45 of the FW Act and two contraventions of s 536(2) of the FW Act. The declarations which I have made reflect this position. 56 As to the question of the imposition of a penalty in respect of the contraventions, the following is to be observed. 57 First, the FWO did not seek that a penalty be imposed in relation to the contravention of s 45 of the FW Act arising from the first respondent's failure to pay late night penalty rates to eight employees. The FWO observed that the amount of the underpayment was approximately $24 and did not merit the imposition of a separate penalty. 58 Secondly, the FWO said that the failure to pay the minimum rate to a junior employee arose from the same course of conduct as the failure to pay the other employees and so no separate penalty should be imposed for that contravention. The respondents agreed with this approach. 59 Thirdly, the FWO contended that two contraventions of s 536(2) of the FW Act which occurred in relation to the failure to issue pay slips which contained the statutory information, occurred by a single course of conduct; and should, accordingly, be treated as a single contravention for the purposes of imposing a penalty. The respondents agreed with this approach. 60 However, there was a difference between the parties as to whether there should be a further grouping of contraventions for the purpose of determining an appropriate penalty. The difference related to how the failure to pay Saturday, Sunday and public holiday penalty rates should be treated for the purposes of assessing penalty. The FWO contended that the failure to pay the Saturday, Sunday and public holiday penalty rates should be treated as each comprising a separate contravention. The respondents contended that the contraventions should be grouped and so would comprise only a single contravention for the purpose of penalty. 61 Thus, FWO contended that it was appropriate to impose a penalty in respect of six contraventions, whereas the respondents contended that the appropriate number of contraventions was four. 62 This difference in approach is reflected to some extent in the total penalty which each of the FWO and the respondents submitted as being the appropriate penalty. The FWO submitted that the total penalty in respect of all contraventions should fall within the range of $71,200 to $95,000 in respect of the first respondent and $14,200 and $19,000 in respect of the second respondent. On the other hand, the respondents submitted that a penalty within the range of $22,400 to $36,700 in relation to the first respondent, and $4,400 to $7,300 in relation to the second respondent, would be appropriate. 63 In my view, the contention advanced by the FWO is to be preferred. This accords with the approach taken by Gray J in Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216 at 233, which was cited with approval in Rocky Holdings Pty Ltd v Fair Work Ombudsman (2014) 221 FCR 153. 64 Accordingly, I will proceed to deal with the question of the appropriate penalty on the basis that there were six contraventions and not, as the respondents would have it, four contraventions of the FW Act. 65 The maximum penalties which may be imposed for contraventions of the FW Act are defined by reference to a "penalty unit" within the meaning of s 4AA of the Crimes Act 1914 (Cth). 66 As mentioned, the contravening conduct occurred between 22 December 2014 and 20 December 2015. A complicating factor in this case is that during the relevant period, the value of a penalty unit was increased from $170 to $180. This occurred on 31 July 2015. The admitted contraventions, therefore, span a period during which there were two different penalty unit values. 67 I propose to follow the approach of Katzmann J in Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557 at [396]-[398] where Katzmann J applied the higher penalty unit value in respect of the contraventions where there had been a continuing course of conduct commencing prior to the increase and continuing after the increase came into effect. 68 Accordingly, as each of the contraventions in this case is premised upon there being a continuing course of conduct, I will assess the maximum penalty by reference to the $180 penalty unit. 69 Based on the increased penalty unit rate, the maximum penalties for the contraventions of the FW Act relevant to this proceeding are as follows: (a) $54,000 in relation to contraventions by the first respondent of s 45 of the FW Act; (b) $27,000 in relation to a contravention by the first respondent of s 536(2) of the FW Act; (c) $10,800 in relation to the second respondent's involvement in the first respondent's contraventions of s 45 of the FW Act; and (d) $5,400 in relation to the second respondent's involvement in the first respondent's contraventions of s 536(2) of the FW Act.

Determining the appropriate penalty 70 I now turn to the question of determining the appropriate penalty in the circumstances outlined above. 71 First, it is necessary to recognise that the primary purpose for the imposition of civil penalties is deterrence. 72 Further, the cases have established that there are a number of considerations to which a court should have regard in assessing the appropriate penalty. 73 I deal with each of the relevant circumstances below.

The nature and extent of the contraventions 74 The nature and extent of the contraventions are described in the statement of agreed facts and admissions. 75 For the purpose of the imposition of a penalty, I observe that the first respondent engaged in the following contraventions of the Restaurant Award which in turn comprised a contravention of s 45 of the FW Act. 76 First, the first respondent contravened cl 20.1 of the Restaurant Award by failing to pay the minimum rate of pay for ordinary hours worked to 13 adult employees. The total amount of underpayment to these employees was $4,584.29. Also, the first respondent contravened cl 20.3 of the Restaurant Award in failing to pay the minimum rate of pay to a junior employee. The total amount of the underpayment in respect of that junior employee was $24.86. The total amount, therefore, of the under payment in respect of adult and junior employees was $4,609.15. 77 Secondly, the first respondent contravened cl 34.1 of the Restaurant Award by failing to pay Saturday penalty rates to 10 employees, including 7 junior employees. The total amount of the underpayment in respect of this contravention was $1,734.52. 78 Thirdly, the first respondent contravened cl 34.1 of the Restaurant Award by failing to pay Sunday penalty rates to 10 employees, including 9 junior employees. The total amount of the underpayment in respect of this contravention was $4,457.61. 79 Fourthly, the first respondent contravened cl 34.1 of the Restaurant Award by failing to pay public holiday penalty rates to 19 employees, including 7 junior employees. The total amount of the underpayment in respect of this contravention was $11,583.80. 80 Fifthly, the first respondent contravened cl 24.2 of the Restaurant Award by failing to pay split shift allowances to 21 employees, including 9 junior employees. This allowance is paid when an employee is required to work a separate work period of two hours or more. The total amount of the underpayment in respect of this contravention was $5,511.94. 81 Sixthly, the first respondent failed to give pay slips during the relevant period which complied with reg 3.46(1) and reg 3.46(5) of the FW Regulations to each of the 22 employees. 82 As mentioned, reg 3.46(1) of the FW Regulations requires that the pay slip, given to an employee, include among other items: (a) the first respondent's name; (b) the date on which the payment to which the pay slip relates was made; (c) any amount paid to the employee that is a bonus, loading, allowance, penalty rate, incentive-based payment or other separately identifiable entitlement; and (d) the Australian Business Number of the first respondent. 83 Regulation 3.46(5) requires that an employer give an employee a pay slip which includes the amount of each superannuation contribution which the employer has made in respect of the employee and the name of the fund to which the contribution was made. 84 The pay slips which the first respondent gave to each of the employees recorded only the hours of work performed by the relevant employee, the flat hourly rate of pay and the gross and net payments for each fortnight. 85 The parties have agreed that the contraventions in respect of these two regulations be grouped for the purpose of imposing a penalty. 86 The contraventions referred to above are serious because they represent a comprehensive failure on the part of the respondents to implement the conditions of the Restaurant Award. This is not a case where there were one or two occasions when the Restaurant Award was not implemented during the course of an otherwise compliant regime by the respondents. Rather in this case, there was a general failure to implement the Restaurant Award in respect of the first respondent's part-time employees. The affected employees included junior employees and adult employees who were vulnerable employees. The respondents did not direct their attention to ensuring that their business operated a system for the payment of wages which would give effect to the provisions of the Restaurant Award. 87 Further, in my view, the failure of the respondents to provide the employees with appropriate pay slips is symptomatic of the disregard by the first respondent of the need to keep comprehensive records in conducting the business. In Fair Work Ombudsman v Han Investments Pty Ltd [2017] FCA 623, Barker J at [114] observed as follows: The record keeping obligations are directed at ensuring the creation and retention of records as a critical tool in the assessment of compliance with workplace laws. Unless an employer complies with the law, and makes and keeps employment records, an effective safety net for employees is difficult to maintain. The result is that employees are more vulnerable to exploitation. The job of the FW Ombudsman, as regulator, in detecting and protecting employees' workplace entitlements is reduced in effectiveness.

The nature and extent of the loss suffered 88 The total amount of the loss suffered by the underpaid employees over the relevant period was $27,920.69. 89 When viewed in isolation, that figure is relatively modest. However, the extent of the loss must also be looked at by reference to the extent to which the amount not paid to an employee represented a proportion of the employee's total remuneration. When looked at from that perspective, the nature and extent of the loss assumes a different complexion. For example, in the case of one employee, Ms Aira Allarse, the amount of her entitlement to wages for ordinary hours worked was $10,062.86 and the total amount of the underpayment was $3,745.86. 90 The loss to the employees, of course, is not a continuing loss because they have been paid the underpayments. However, the rectification only occurred by reason of the intervention of the FWO. But for that intervention, the first respondent would have gained $27,920.69 at the expense of its vulnerable employees.

The size of the business 91 In certain circumstances, the size of the business may be a relevant factor to take into account in determining the appropriate penalty. This is because the size of the business may reflect the capacity of the respondent to pay the penalty and thereby reflect the harshness of the penalty and its attendant effectiveness as a means of specific deterrence. 92 In this case, however, the only evidence which the respondents adduced on the question of the capacity of the first respondent to pay a penalty was the operating statement and the balance sheet of the first respondent for the financial year ended 30 June 2016. The respondents contended that the Court should have regard to the fact that the first respondent is a small family company which incurred a loss of $33,402 for the year ended 30 June 2016 and that the Court should conclude that the first respondent only has a very limited capacity to pay a penalty. 93 I place little weight on the respondents' contention. As mentioned, the shareholders of the first respondent are the second respondent and Mr Pham. The evidence showed that the second respondent has operated profitable nail businesses as well as a profitable business in Vietnam and has jointly with Mr Pham been able to purchase five properties in the course of the last 11 years. The balance sheet also reflects that the shareholders are prepared to advance monies to the first respondent for the conduct of its business. It is apparent, therefore, that the first respondent has been able to rely upon its shareholders' funding and that the shareholders have sufficient assets to support that funding.

Whether the respondents have previously contravened workplace laws 94 There was no evidence that the respondents had been found to have previously contravened workplace laws.

The deliberateness of the contraventions 95 The FWO contended that the contravening conduct of the first and second respondents should not be characterised as a deliberate contravention of the workplace laws. Rather, the FWO contended that the conduct should appropriately be characterised as being conduct in reckless disregard of the workplace laws. 96 The FWO referred specifically to the previous dealing between the FWO and the respondents in 2013 in relation to Ms Guest's complaint about underpayment of wages and deficient pay slips. The FWO contended that the second respondent, and through her, the first respondent, could not have been under any misunderstanding as to the first respondent's statutory obligations after 5 November 2013, when the FWO emailed the second respondent a hyperlink to the Paycheck Plus tool (see [43] above). 97 In response to the FWO's contention, the first and second respondents relied upon their evidence that the first respondent's payroll system had been set up by the franchisor, and that Mr Pham and the second respondent were unfamiliar with Australian culture and laws as they had migrated to Australia from Vietnam in 2006 and had no relevant qualifications to run a business in Australia. 98 Further, in relation to her dealings with the FWO in 2013 arising from the complaint made by Ms Guest, the second respondent relied on her evidence that she could not recall who Ms Guest was, nor the mediation, and that she did not understand the telephone conversation with the Fair Work inspector because of her language barrier. 99 I accept the submissions of the FWO that the respondents' conduct is to be characterised as conduct in reckless disregard of the workplace laws. 100 It is apparent that neither Mr Pham nor the second respondent took any action to regularise the payment of wages and penalty rates following the respondents' dealings in November 2013 with the FWO. In my view, the second respondent's lack of familiarity with the English language was not a sufficient or satisfactory explanation for her failure to take steps to implement systems which would cause the first respondent to comply with the Restaurant Award conditions. It was always open to the second respondent, if she was not able fully to understand the content or gravamen of her dealings with the FWO in 2013, to have obtained professional advice on this issue. However, in my view, and I find, that the second respondent simply chose to disregard her dealings with the FWO in November 2013 and continued to operate the defective wages payment system which she had inherited, recklessly indifferent as to whether she was, thereby, compliant with the Restaurant Award conditions.

The involvement of senior management 101 As mentioned, the first respondent is a small family company. The second respondent is and was, at all material times, involved in the day to day operations of the company. She was the person who decided on the rates of pay for employees and implemented the systems which led to the employees being paid and the pay slips being issued.

Contrition, corrective action and cooperation 102 These are factors which can be taken into account in the respondents' favour in considering the amount of the penalty. 103 There has been a good deal of cooperation by the respondents with the FWO after the issue of the FWO's audit letter on 25 January 2017. After receipt of the letter notifying the respondents of the underpayments, the respondents made payments to the affected employees promptly. The credit to be given to this factor is tempered, however, by the fact that this action was really a belated compliance by the first respondent with its statutory obligations. 104 Further, the respondents, after being served with the originating application and statement of claim in this proceeding, made early admissions and have cooperated in the conduct of these proceedings. 105 The extent of the cooperation with the applicant, however, in relation to the investigation of this matter is more problematic. 106 As was deposed to by Ms Suppiah, the respondents initially ignored approaches which had been made by the applicant and belatedly responded by providing some documents to the applicant even though they were not the documents that the applicant had requested. I place no weight on the second respondent's explanation for not responding earlier to the FWO's requests for the production of documents. 107 However, on balance, the respondents deserve significant credit, in determining the appropriate penalty, for their cooperation in making an early admission of liability. 108 Another factor in favour of the respondents is that Mr Pham and the second respondent have apologised to the employees involved and thus demonstrated an element of contrition.

Deterrence 109 This is a case where, in my view, specific deterrence is an element to be taken into account in determining the appropriate penalty. 110 As mentioned, until at least early March 2016, the approach of the second respondent was to ignore the intervention of the FWO in the conduct of the first respondent's business. The tenor of the second respondent's affidavit is somewhat dismissive of the FWO's dealing with her in 2013 in relation to the complaint made by Ms Guest. Further, in 2016, there was a failure to respond to the initial approaches of the FWO in relation to this matter when asked to provide documents. 111 Although the respondents say that they will comply with the law in the future, in my view, the penalty should be set at a level which will operate as a reminder to the respondents of the importance of operating, and continuing to operate, a business which complies with the Restaurant Award conditions and of the importance of paying the young and vulnerable employees who comprise a substantial part of the first respondent's workforce their lawful entitlements. 112 The penalty should reflect an element of general deterrence. This is because the first respondent operates in an industry where the employees are frequently employed on a part-time basis; and are often young or vulnerable, or both; and the industry attracts more complaints to the FWO than any other industry. 113 It is important for employers in the restaurant/café industry to appreciate that serious consequences will attend a failure to meet the Restaurant Award conditions. The penalty should be set at a level sufficient to demonstrate that the payment of a penalty is not to be regarded by a recalcitrant employer simply as a cost of doing business in defiance of the law.

the appropriate penalty 114 I now turn to the question of determining the appropriate penalty in respect of the six contraventions of the FW Act which are in issue. 115 I take into account, on the one hand, that the contraventions are serious in that they arose from a comprehensive failure to apply the Restaurant Award to a group of vulnerable employees in circumstances where the second respondent and through her, the first respondent, acted with reckless indifference to the implementation of the Restaurant Award and the FW Act. 116 On the other hand, the respondents did to a limited extent cooperate with the FWO in the investigation of their conduct and cooperated extensively after the audit letter of 25 January 2017 was sent to them. Thereafter, the respondents paid all of the affected employees the amount of the underpayments owed to them and also cooperated in the disposal of this proceeding by admitting the contraventions and agreeing a statement of agreed facts and admissions. 117 In addition, the respondents have demonstrated contrition by apologising to the employees concerned and the respondents have not previously been found liable in a court for any contravention of workplace laws. 118 Further, the actual loss caused to the employees, and therefore, the potential gain to be made by the respondents in underpaying the employees is objectively speaking a relatively modest amount of $27,920.69. 119 Having regard to the maximum penalty for each of the contraventions and taking into account the aforegoing circumstances, I am of the view that the appropriate penalty, before the application of the totality principle, is the following: (a) In respect of each of the five contraventions of s 45 of the FW Act: (i) the first respondent - $10,500; (ii) the second respondent - $2,100. (b) In respect of the contraventions of s 536(2) of the FW Act: (i) the first respondent - $5,000; (ii) the second respondent - $1,000. 120 Thus, the total penalty in respect of the contravening conduct of each of the respondents before the application of the totality principle is as follows: (i) the first respondent - $57,500; (ii) the second respondent - $11,500. 121 In my view, after the application of the totality principle and the adoption of an instinctive synthesis, the total penalty to be paid by the first respondent is $37,500 and the second respondent $7,500. I certify that the preceding one hundred and twenty-one (121) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.

Fair Work Act 2009(Cth)ss 45, 536(2), 550, 712

Crimes Act 1914(Cth)s 4AA

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Judgment (18 paragraphs)

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