Whether the breaches arose out of the one course of conduct

1. It is conceded that the breaches arose out of the one course of conduct. However, the course of conduct in this case involved multiple breaches of penalty provisions, annual leave and similar provisions which are "notorious" in the Australian workplace culture (see Fair Work Ombudsman v Bosen Pty Ltd & Anors at 33 (unreported, Magistrates Court of Victoria, Industrial Division, 21 April 2011, Magistrate Hawkins).

1. The First Respondent is a small, family-run business operating in Footscray. I take into account Driver FM's observation in Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 stated at paragraph [27]:
   • [27] Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to the Court's consideration of penalty...
2. The Respondents argue that Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 does not apply in this case as the Respondents were not under the impression that because of their size, they were able to breach the provisions. The Respondents submit that the breaches arose out of their mistaken belief that compliance with the visa conditions was sufficient to meet their obligations, which I have rejected. I note that Driver FM in Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 went on to quote Kelly v Fitzpatrick [2007] FCA 1080:
   • [27] ...As stated recently, by Tracey J in Kelly v Fitzpatrick [2007] FCA 1080, at [28]:
     • 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.
   • (emphasis added)
3. The emphasis here is that the obligation to meet minimum employment standards is imposed upon all businesses, large and small. However, the resources available to larger business to establish systems to ensure compliance with workplace laws must be recognized, as must the practical reality that there are numerous regulatory obligations upon businesses that must be juggled by small business operators around their primary day-to-day work in running the business.

1. It is not clear that the breaches were deliberate. The Respondents point to the transcript of the Second Respondent's interview with the Fair Work Inspector to demonstrate his misunderstanding of the visa conditions and of his legal obligations. For example, the Respondents point to the Second Respondent's statement that despite times when the employee only came into work for 10 or 20 hours in a week, he was still paid his full weekly wage as obligated to do so under the visa conditions (see Daniel Tan's affidavit filed on 16 May 2011, annexure DT-5 at question 10). Notably, there are no records to demonstrate this proposition. The limited records that were produced contained no entry showing that the employee ever worked in excess of 38 hours in a week, although did contain numerous entries showing less than 38 hours from July 2008 to July 2009. The records that the Respondents did keep are inconsistent with the Second Respondent's rationale for allowing the employee to work greater hours at times for the same weekly rate on the basis that he worked less hours at other times.

1. The Second Respondent has admitted to his involvement in 12 contraventions. In this case the Second Respondent was not only responsible for the day to day management, direction and control of the First Respondent's operation but he was also responsible for setting and adjusting the employee's rates and hours and for the making and keeping of records (see paragraph [7] of the Statement of Agreed Facts).
2. However, this case involves a small family-run restaurant, and as such there is no 'senior management' in the sense that the term refers to much larger companies.

1. The Respondents have ensured that the underpayments claimed have been met, as set out above. The Second Respondent was not frank in the record of interview, however nor did he have the benefit of legal advice before that record of interview. The Respondents did ultimately admit the breaches. The payments and admissions should be reflected in the penalty, however in this case I do not accept that this reflects remorse or contrition on behalf of the Respondents.

Whether the Respondents have taken corrective action

1. There is no evidence before the Court that the First Respondent has implemented any systems in the business to ensure that it is now complying with its obligations to any employees. I note, however, the Respondents' submission that they have sought legal advice as to their ongoing obligations under the Commonwealth workplace law.

Whether the Respondents cooperated with the enforcement authorities

1. The Respondents dispute the Applicant's submission that the Respondents were initially uncooperative. During the interview on 28 January 2010 the Second Respondent, on the Applicant's version, sought to mislead them by indicating that the employee was only required to work 38 hours per week and was provided with payslips (see paragraphs [10]-[15] of Inspector Daniel Tan's affidavit filed on 16 May 2011). The Respondents later admitted that the employee was only provided with a payslip once and was required to work up to 60 hours per week on many occasions (see paragraph [5.42] of the Applicant's submissions).
2. During the cross-examination of the Fair Work Inspector Mr Tan, Counsel for the Respondents pointed to the various procedural failings of the interview. This included the Inspector's failure to inform the Second Respondent of his right to remain silent and the right to have legal advice. It was submitted that when the Second Respondent's son, being the support person, left the interview the interview recommenced without the son being present (see paragraph [6.3] of the Respondents' submissions). However, it is apparent from the transcript that the son was only absent for three out of over 170 questions, being questions 73 to 75. In the circumstances, I do not accept that the submission of the Respondents' lack of cooperation was "unfairly made" (see paragraph [6.2] of the Respondents' submission). While I accept that the Second Respondent's legal rights were not fully explained and that his first language is not English, I note that he was assisted by an interpreter and the Fair Work Inspector explained to him the following (at page 2 of the transcript):

Q6. I will be asking you questions in relation to the alleged contraventions of the Acts and Liquor and Accommodation Restaurants Award. Before I do so I must warn you that anything you do or say will be recorded and may be used as evidence in a court of law. (emphasis added)

1. Whilst it was unfair that the Second Respondent was not clearly told of his right to legal advice, that does not seem to me to be an explanation or excuse for him lying to Mr Tan. Honesty is a fundamental value, the absence of which is not explained by a lack of legal advice. Whilst I have viewed the interview critically due to the lack of warning about the right to legal advice, it nonetheless demonstrates a lack of honesty from which it is appropriate to draw an adverse inference against the Second Respondent that he was initially uncooperative. Had the Second Respondent been completely honest and frank there is little doubt that the submission would have been that he co-operated and shown remorse in making frank admissions even without legal advice as to the benefits of doing so.
2. The Applicant also submitted that there was a second incident in which the Respondents were not cooperative. In his affidavit filed on 16 May 2011, the Inspector annexed a file note of his telephone conversation with the daughter (see annexure DT-6):

Ms Singh Rawat advised that all his [the employee's] allegations are false. She said "he said we didn't give him pay slips but when he asked for one when he was applying to rent a house, we gave him a pay slip then". I advised that this was not a contravention I had identified in the letter I had sent as I did not have evidence that pay slips were not provided. I advised that Mr Singh had not hidden the fact that he received one pay slip from the company for the purposes of renting a property. I advised that she had just however advised me that this was the only time a pay slip was provided. She said "no, this is not the case. He was given pay slips other times too". I advised that this is not what she had just stated. Ms Singh Rawat mumbled "oh shit". She advised that they were in the process of engaging a lawyer as they are disputing this payment...(emphasis added)

I am not satisfied that this conduct of Ms Rawat ought to be attributed as conduct of the Second Respondent. However, I do accept the inference that can be drawn from this file note is that the First Respondent, through the daughter as its agent, had accused the employee of making false allegations.

1. The Applicant has acknowledged that the Respondents have cooperated since the underpayment was rectified and noted that the payment was made before proceedings were filed on 16 December 2010. By 14 February 2011 Consent Orders were made with a notation that the Respondents admitted to the contraventions. The Applicant has acknowledged that this has considerably shortened the litigation process, allowing the matter to proceed to a penalty hearing only.
2. In Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455 Stone and Buchanan JJ stated:
   • 76 As Branson J has pointed out (see Alfred v Walter Construction Group Limited [2005] FCA 497) the rationale for providing a discount for an early plea of guilty in a criminal case does not apply neatly to a case, such as the present, where a civil penalty is sought and the case proceeds on pleadings. Nevertheless, in our view, it should be accepted, for the same reasons as given in Cameron_, that a discount should not be available simply because a respondent has spared the community the cost of a contested trial. Rather, the benefit of such a discount should be reserved for cases where it can be fairly said that an admission of liability: (a) has indicated an acceptance of wrongdoing and a suitable and credible expression of regret; and/or (b) has indicated a willingness to facilitate the course of justice._ (emphasis added)
3. In the circumstances, the Applicant submitted that while the Respondents are entitled to a discount, they are not entitled to the maximum discount of 25% to 50% given that they were not cooperative from the start of the investigation and have not indicated an expression of regret. The Applicant has submitted that their recommendation of a penalty being 50% to 60% of the maximum has already factored in a partial discount for the Respondents.
4. I accept that there has been only a partial willingness to facilitate the course of justice.

1. The need to ensure compliance with minimum standards by providing an effective means for investigation and enforcement of employee entitlements is set out in the objects of both the Workplace Relations Act and the Fair Work Act. The objects of the Workplace Relations Act are set out in section 3:
   • 3 [Objects]

The principal object of this Act is to provide a framework for cooperative workplace relations which promotes the economic prosperity and welfare of the people of Australia by:

...

(f) ensuring compliance with minimum standards, industrial instruments and bargaining processes by providing effective means for the investigation and enforcement of:

• (i) employee entitlements; and
• (ii) the rights and obligations of employers and employees, and their organisations; and

1. Similarly, the objects of the Fair Work Act include:
   • 3 [Object of this Act]
   • The object of this Act is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians by:
     • ...
     • (b) ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders; and
     • ...
2. I also have regard to one of the objects of the Workplace Relations Regulations 2006:
   • Part 19 Records relating to employees and pay slips
   • Division 1 Preliminary
   • 19.1 [Purpose of Part 19]
   • (1) For sections 836 and 846 of the Act, these Regulations provide for:
     • (a) the making and retention by employers of records relating to the employment of employees; and
     • (b) the inspection of records by workplace inspectors; and
     • (c) the issue of pay slips to employees by employers.
   • (2) This Part also provides for transitional matters arising out of the reform commencement. (emphasis added)
3. The need to ensure compliance, particularly with respect to vulnerable workers, such as those on work visas, those who come to Australia without strong language skills, and those with little education is crucial to a just society, and the avoidance of exploitation.
4. Whilst the record keeping obligation with respect to pay slips only appears in the Regulations, its central importance in industrial matters cannot be underestimated. Proper pay slips allow employees to understand how their pay is calculated and therefore easily obtain advice. Pay slips provide the most practical check on false record keeping and underpayments, and allow for genuine mistakes or misunderstandings to quickly be identified. Without proper pay slips employees are significantly disempowered, creating a structure within which breaches of the industrial laws can easily be perpetrated.

1. I accept that there is a need for general deterrence and to send a message to the community, and in particular to small employers, that employers must take steps to ensure correct employee entitlements are paid. As Tracey J stated in Kelly v Fitzpatrick [2007] FCA 1080 (at paragraph [28)]:
   • [28] The respondents have expressed contrition and have put in place mechanisms which are designed to ensure that there will be no repetition of the breaches which have led to the present proceeding. Specific deterrence does not, therefore, loom large as a consideration in determining penalty. It does not follow that the need for general deterrence may be disregarded. As Finkelstein J said in CPSU v Telstra Corporation Limited [2001] FCA 1364; (2001) 108 IR 228 at 231: "even if there be no need for specific deterrence, there will be occasions when general deterrence must take priority, and in that case a penalty should be imposed to mark the law's disapproval of the conduct in question, and to act as a warning to others not to engage in similar conduct ..." 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]. (emphasis added)
2. I accept that general deterrence is important in this case. The contraventions involved a foreign worker engaged on a subclass 457 visa. It is important that employers of such workers take real care to comply with workplace laws. With this respect I have regard to Lucev FM's statements in Fair Work Ombudsman v Orwill Pty Ltd & Ors [2011] FMCA 730:
   • [32] ...As for general deterrence, it is appropriate in circumstances where there has been a failure to provide records over a prolonged period, and, on the evidence, that has occurred in relation to foreign workers who have entered Australia on a sponsored business visa scheme, for there to be a significant element of general deterrence. The Court ought leave no room for doubt as to its view that foreign workers who enter Australia on business sponsored visas ought to have their employment records maintained as required by Commonwealth workplace relations legislation.
3. I also accept that the need for specific deterrence is also high given that the contraventions involved a vulnerable employee on a subclass 457 visa with limited English. I have regard to the Applicant's submission that the First Respondent is still trading and that in the future it is possible that the company may engage staff to work in the business.

1. Tracey J also sets out in Kelly v Fitzpatrick [2007] FCA 1080 the approach in ensuring the aggregate penalty is not oppressive (see paragraph [30]):
   • [30] Another factor which must be taken into account in the fixing of pecuniary penalties for multiple breaches of statutory stipulations is the totality principle. This principle is designed to ensure that the aggregate of the penalties imposed is not such as to be oppressive or crushing. Different views have been expressed as to the manner in which the principle ought properly to be applied. On one view the starting point should be the determination of an appropriate total penalty. That figure would then be divided by the number of breaches to produce a penalty for each breach: see CPSU v Telstra Corporation Limite_d [2001] FCA 1364; (2001) 108 IR 228 at 230[7]. The orthodox position, however, which I consider should be adopted, is that the starting point is the determination of appropriate penalties for each contravention of the statutory norm. The aggregate figure is then considered with a view to ensuring that it is an appropriate response to the conduct which led to the breaches: see_ Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 at 53. See also Ponzio v B & P Caelli Constructions Pty Ltd [ 2007] FCAFC 65 at [145] per Jessup J...

1. The Applicant submit that the penalty should be "at the high end of the mid range", being 50% to 60% of the maximum penalty that can be imposed. In their submissions, this translated into the following ranges:
   1. The First Respondent: $71,500 to $85,000;
   2. Second Respondent: $11,000 to $13,000.
2. On the Respondent's version, the First Respondent's penalty would be 17.5% to 24.5%, being $25,000 to $35,000 and for the Second Respondent a range of 27.3% to 43.2%, which is $6,000 to $9,500.
3. A further unusual issue that arises in this case is that the family operating the business has a disabled child. There can be no issue with the fact that a child with disabilities often brings significant financial and emotional pressures for many families.
4. The Respondents have made submissions about the company's financial hardship and the expense associated with a medical condition suffered by one of the Second Respondent's other daughters. These submissions are to support the proposition that the penalty recommended by the Applicant would impose significant hardship on the Respondents. It was apparent from the daughter's cross-examination that, despite claiming to have full knowledge of the Respondents' affairs, she had little knowledge of the business She was not able to explain about the business' balance sheets, for example why the assets and liabilities balanced to the dollar in every year. Nor did she explain how the company funded an approximately $62,000 loss in a particular year. No substantive evidence was given as to the financial position or operation of the family trust. The real financial position of the Respondents and the family remains unclear.
5. I note that the Second Respondent is one of the directors of the company and is responsible for the day-to-day management, direction and control of the company's operations (see paragraph [7] of the Statement of Agreed Facts). In spite of his position, the Second Respondent was not called to give evidence on the company's financial affairs at the hearing. Counsel for the Applicant submitted that the Second Respondent's unexplained failure to give evidence should lead to a Jones v Dunkel inference that his evidence would not have assisted the Respondents' case. Following a review of the authorities, Gilmour J stated in Australian Securities & Investments Commission v Fortescue Metals Group Ltd [No 5] [2009] FCA 1586; (2009) 264 ALR 201; (2009) 76 ACSR 506:
   • [96] Further, in my view, nothing that has been said by the High Court in Dyers [2002] HCA 45; 210 CLR 285 and the other authorities discussed above supports the proposition that the general rule proscribing the making of inferences from a defendant's failure to give evidence in criminal proceedings should be extended to civil penalty proceedings in the form of a prohibition against applying the rule in Jones v Dunkel, notwithstanding that pursuant to Rich s 1317L also obliges the court to apply the body of law which has developed in relation to the privileges against penalties and forfeitures when deciding whether an order for discovery should be made.
   • [97] Further authority for the availability of the rule in Jones v Dunkel in civil penalty proceedings is found in Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd (2001) 115 FCR 442, where Hill J stated at [33]:
     • Where the proceedings are criminal (and the present proceedings are not; they are proceedings, inter alia, for the recovery of a civil penalty) it might be thought that the failure of the accused to go into evidence should not lead to the drawing of Jones v Dunkel inferences. After all it is clear that a witness can not be compelled to give evidence which is likely to incriminate the witness or expose the witness to a penalty. However, even in criminal cases it has been held that the failure of the accused, who is in a position to deny, explain or answer the evidence adduced by the prosecution, to give evidence will permit the jury to draw inferences adverse to the accused more readily: see Azzopardi v R [2001] HCA 25; (2001) 179 ALR 349, affirming Weissensteiner v R [1993] HCA 65; (1993) 178 CLR 217. A fortiori, therefore, the failure of a respondent to proceedings for recovery of a pecuniary penalty to give evidence on a matter relevant to an issue in the proceeding and deny, explain or answer the evidence adduced against the respondent will permit the Court more readily to draw the inferences to which the decision in Jones v Dunkel refers.
   • (emphasis added)

Counsel for the Applicant pointed out that while the matter went on appeal, Gilmour J's discussion of the Jones v Dunkel inference was not an issue on appeal (see Australian Securities and Investments Commission v Fortescue Metals Group Ltd [2011] FCAFC 19; (2011) 190 FCR 364; (2011) 274 ALR 731; (2011) 81 ACSR 563 at paragraphs [79] to [81]) and therefore his Honour's statements stand.

1. I also have regard to Cameron FM's words in Fair Work Ombudsman v Centennial Financial Services Pty Ltd [2010] FMCA 863; (2010) 245 FLR 242:
   • [133] The rule in Jones v Dunkel is also relevant to that conclusion. As Mr Mertes observed, Jones v Dunkel inferences are available against parties in civil remedy proceedings. It was said in CEPU v ACCC at 490 [76] that there is no reason to deny the applicability of the principles in Jones v Dunkel in civil proceedings for pecuniary penalties provided that in doing so the Court proceeds in accordance with the principles applicable to s.140 of the Evidence Act 1995. Further, Giles JA said in Adler v Australian Securities & Investments Commission [2003] NSWCA 131; (2003) 179 FLR 1:
     • ... civil penalty proceedings are expressly to be maintained by civil law processes, not by criminal trial with its fundamental features. (at 147 [659])
   • (emphasis added)
2. In this case it is not alleged that the Respondents have significant wealth. In light of the authorities, I proceed on the basis that the financial position of the Respondents, and the Second Respondent's family, has not been made clear, and do not take into account that the family may be suffering financial hardship.

1. In light of the circumstances I find that the appropriate penalties to be:
   1. The First Respondent: $60,000; and
   2. The Second Respondent: $12,000.

I certify that the preceding seventy-nine (79) paragraphs are a true copy of the reasons for judgment of Riethmuller FM