Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412

(2) Payment of the penalties in order 1 be made within 60 days.

I have before me an application filed on 21 May 2007 seeking the imposition of penalties pursuant to s.719 of the Workplace Relations Act 1996 (Cth) ("the Workplace Relations Act"). The application is brought by an inspector who has standing pursuant to s.718 of the Workplace Relations Act. The application seeks the payment of penalties to the Commonwealth in accordance with s.841 of the Workplace Relations Act and further seeks that the penalties be paid within 30 days. Although the application seeks costs, counsel for the applicant did not press that part of the application, having regard to the terms of s.824 of the Workplace Relations Act. I incorporate into this judgment the terms of annexure A to the application which provides particulars of the application:

Penalties relating to breaches of the applicable provisions

In accordance with section 718 of the Workplace Relations Act 1996 (Cth) (the Act) the Applicant seeks the imposition of a penalty pursuant to section 719 of the Act on the Respondent for breach of applicable provisions binding on the Respondent.

BM Sydney Building Materials Pty Ltd (ACN 104 291 250) (the Respondent), is an employer within the meaning of section 6 of the Act.

Particulars

The Respondent is an Australian proprietary company limited by shares.

The Respondent's business involved the sale and distribution of building materials.

Two of the five employees engaged in work for the Respondent are covered by the Storemen and Packers, General (State) Award (the Award). The Award covers the activities of the Respondent, given that the Respondent's business falls within the scope of clause 39 of the Award, namely the Area, Incidence and Operation Clause.

Particulars

(a) The Respondent conducts its business in a warehouse in Cabramatta.

(b) Two of the five employees engaged at the Respondent's business perform duties which fall within the classifications specified in clause 2A of the Award.

The Award constitutes a Notional Agreement Preserving State Awards (NAPSA) within the meaning of Part 1 of Schedule 8 of the Act.

Clause 43 of Schedule 8 states that a NAPSA may be enforced as if it were a collective agreement within the meaning of the Act.

An eligible Court may impose a penalty in accordance with Division 2 of Part 14 of the Act, if a person, bound by an applicable provision breaches the provision, pursuant to s.719 of the Act.

An applicable provision is defined to include a "collective agreement" pursuant to s.717 of the Act.

Employment history

Employment between May 2006 and 7 June 2006 (Initial Period)

Mr Denning commenced employment in late April or early May 2006.

Mr Denning's employment was not regulated by a written contract of employment.

However, Mr Denning's terms and conditions of employment were governed by the Award.

Particulars

Mr Denning's duties were akin to the duties listed in clause 2A of the Award for a Storeman and Packer Grade 1.

The Respondent engaged Mr Shane Denning between late April 2006 and approximately 11 August 2006.

Mr Denning was required to work at the warehouse of the Respondent and assist in the deliveries for the Respondent. His duties included placing the stock in appropriate locations, loading materials for customers and unloading building materials from suppliers in the warehouse.

Mr Denning was employed on a casual basis.

During the Initial Period, Mr Denning generally worked from 6am to 3pm each day.

His remuneration consisted of $80.00 per day. Superannuation contributions were not paid on this amount and no tax was deducted.

Mr Denning was not provided with payslips.

Failure to pay casual loading - breach of clauses 2(i) and 10(iii)

On the basis of the material facts pleaded, in paragraphs 11 to 16 above, the Respondent has breached the following clauses of the applicable provision in relation to the Initial Period of employment:

(a) Clause 2(i) of the Award: A "Casual Employee" shall mean an employee who is engaged and paid as such.

(b) Clause 10(iii) of the Award: Casual loading: Casual employees shall be paid an hourly rate equal to the appropriate weekly rate divided by 38, plus a loading of 15%, calculated to the nearest half cent, with a minimum payment on any day of 4 hours.

(c) Clause 10(iii) of the Award: Annual leave loading for casual employees. The Respondent breached clause 10(iii) of the Award by failing to pay Mr Denning the 8.3% loading required instead of annual leave; and

(d) Clauses 13 and 16(i) - failure to pay overtime. Mr Denning regularly worked between 6am and 3pm. The hours worked, during ordinary hours (and therefore without entitlement to overtime payments), are between 6:30am and 5:30pm, pursuant to clause 13 of the Award. Hours worked outside the ordinary span of hours shall be overtime, pursuant to clause 16(i) of the Award. An employee shall be paid one and a half times for the first 2 hours and double time thereafter for any overtime worked, pursuant to clause 16(i).

Failure to pay shift allowances

Further and in the alternative, Mr Denning's pattern of employment was such that he worked as a shift worker for the Respondent during the initial period.

If Mr Denning was defined as a shift worker, the Respondent failed to pay Mr Denning the shift penalty of 12.5% (under clause 11(vii)(a) of the Award).

Furthermore, if Mr Denning was employed as a shift worker, the Respondent failed to pay overtime at the rate of time and a half for those hours worked in excess of the ordinary hours worked on the Early Morning Shift (pursuant to clause 11(x)(b) of the Award).

Employment between 7 June 2006 and August 2006 (Second Period)

On or around 7 June 2006, Mr Denning signed a document entitled "Subcontractor Work Agreement" (Agreement).

Mr Denning continued to work for the Respondent until 11 August 2006 when his employment was terminated.

Mr Denning's employment with the Respondent during the Second Period continued to be governed by the Award.

During the Second Period, Mr Denning worked primarily between 6:00am and 3:00pm although in some weeks his hours did fluctuate.

During the Second Period Mr Denning was paid at a rate of $459 which was pro-rated on the basis of a 45 hour week, being $10.20 per hour (purportedly inclusive of GST).

During the Second Period, Mr Denning was absent from work on two occasions due to illness. He was not paid any sick leave for this absence.

Mr Denning was not provided with payslips.

Mr Denning was not always paid on time and often had to chase the Respondent for payment.

Sham contracting arrangement

The Agreement was a sham arrangement.

The contract in force during Mr Denning's engagement by the Respondent was in fact a contract of employment.

Particulars

(a) Mr Denning's duties did not change from those performed during the Initial Period.

(b) Mr Denning did not have an Australian Business Number and was not asked to provide one to the Respondent.

(c) Notwithstanding the express terms of the Subcontractor Work Agreement, at no time was Mr Denning required to provide an invoice for the work that he performed. He was paid his salary regardless of the fact that he did not provide an invoice.

(d) His salary did not change from that paid during the initial period prior to entering into the contract.

(e) At all relevant times, Mr Denning believed that he was an employee of the Respondent.

(f) Mr Denning remained under the constant direction and supervision of the Respondent.

(g) The Respondent did not explain to him the significance of the purported contractor agreement.

(h) Mr Denning believed he was being hired as a permanent employee and not an independent contractor

(i) Mr Denning states that he signed the agreement under duress.

(j) Mr Denning paid no GST on the fees.

(k) Mr Denning made deliveries for the Respondent on an infrequent basis and using the Respondent's vehicle.

(l) On one occasion on 11 July 2006, Mr Denning had an accident whilst driving the company motor vehicle, the Respondent assumed liability and paid for the damage caused.

(m) Notwithstanding the express terms of the purported contractor agreement, Denning did not have any personal insurance and was never asked to provide a copy of a certificate of insurance.

Breaches of the Award with respect to the Second Period

Casual employee

The Applicant seeks the imposition of the following penalties against the Respondent on the basis that the Respondent breached the Award by failing to pay Mr Denning amounts due to him on the basis that he was a casual employee of the Respondent during the Second Period.

The Applicant seeks the imposition of penalties relating to the following breaches of the Award:

(a) Clause 2(i) of the Award: A "Casual Employee" shall mean an employee who is engaged and paid as such.

(b) Clause 10(iii) of the Award: Casual loading: Casual employees shall be paid an hourly rate equal to the appropriate weekly rate divided by 38, plus a loading of 15%, calculated to the nearest half cent, with a minimum payment on any day of 4 hours. The Award required that:

(i) a rate of $10.70 per hour for the ordinary hours of work in the period between 7 June 2006 and 21 June 2006, when Mr Denning turned 18. Given that Mr Denning was paid $459 per week for a 45 hour week and therefore there was an underpayment of $0.50 per hour for ordinary hours worked; and

(ii) a rate of $12.67 per hour for the ordinary hours of work in the period 21 June 2006 (when Mr Denning turned 19) to August 2006. During this period, Mr Denning was paid $459 per week for a 45 hour week and therefore there was an underpayment of $2.47 per hour) for ordinary hours worked.

(c) Clause 10(iii) of the Award: Annual leave loading for casual employees;

(d) Clause 12 - failure to pay on the regular basis stipulated in the Award;

(e) Clauses 13 and 16(i) - failure to pay overtime.

Permanent Employee

In the alternative, the Applicant seeks the imposition of a penalty on the basis that the Respondent breached the Award by failing to pay Mr Denning amounts due to him on the basis that he was a permanent employee of the Respondent during the Second Period.

If the Court finds that the Applicant was a permanent employee during the Second Period, the Applicant seeks the imposition of penalties relating to the following breaches of the Award:

(a) Clause 10(i) of the Award: Failure to pay Mr Denning in accordance with the minimum award rates contained in Table 1 of the Award. If Mr Denning was in fact engaged as a permanent employee during the Second Period, Mr Denning's hourly rate under the Award should have been $11.02 on and with effect from 21 June 2006 when he turned 19. He was therefore underpaid at the rate of $0.82 per hour for ordinary hours worked from 21 June 2006 to the termination of his employment;

(b) Clauses 26 of the Award: Failure to provide 2 days' sick leave to Mr Denning.

(c) Clause 27 of the Award: Failure to provide Mr Denning with annual leave; and

(d) Clause 28 of the Award: Failure to provide Mr Denning with leave loading at a rate of 17.5%, or pay Mr Denning an amount in respect of accrued annual leave and leave loading on termination of his employment.

If Mr Denning was defined as a shift worker during the Second Period, the Respondent failed to pay Mr Denning the shift penalty of 12.5% (under clause 11(vii)(a) of the Award).

Furthermore, if Mr Denning was employed as a shift worker, the Respondent failed to pay overtime at the rate of time and a half for those hours worked in excess of the ordinary hours worked on the Early Morning Shift (under clause 11(x)(b) of the Award).

Failure to pay forklift allowance - breach of clause 10(v) of the Award

From time to time, Mr Denning was required to operate a forklift in the warehouse. Mr Denning was not paid the forklift loading for this work, as prescribed under the Award.

The Applicant seeks that a penalty be imposed for a breach of clause 10(v) of the Award.

Failure to pay superannuation - breach of clause 37 of the Award

The Respondent failed to pay employer superannuation contributions for or on behalf of Mr Denning, in breach of clause 37 of the Award.

The Applicant seeks penalties for this breach of the Award.

Failure to make and keep records relating to employees - breaches of section 836 of the Act

The Respondent failed to provide Mr Denning with pay slips.

The Respondent failed to keep adequate employment records, pursuant to section 836 of the Act and regulations contained in Chapter 2 of the Workplace Relations Regulations 2006 (the Regulations).

The respondent is a constitutional corporation within the meaning of s.4 of the Workplace Relations Act.

The matter proceeded before me today on the basis of an agreed statement of facts which I incorporate into this judgment:

The Applicant

The Applicant is an inspector for the Office of Workplace Services (OWS).

The Applicant investigated the matter on behalf of the OWS.

Mr Denning made a written statement in connection with this matter on 7 September 2006.

The Applicant interviewed the Managing Director of the Respondent, Mr Ming Lee, on 8 September 2006

The Applicant interviewed the Respondent's accountant consultant administrator, Mr Kulbeer Singh on 8 September 2006

The Applicant interviewed Mr Denning by telephone on 14 September 2006 and interviewed him in person on 1 November 2006.

Initial Period

The Respondent's business involves the sale and distribution of building materials. The Respondent conducts its business in a warehouse in Cabramatta.

Mr Denning commenced employment in late April or early May 2006 (Initial Period).

At this time Mr Denning was 18 years old.

During the Initial period, Mr Denning was employed on a casual basis.

Mr Denning was required to work at the warehouse of the Respondent and assist in deliveries for the Respondent. His duties included placing the stock in appropriate locations, order assembling, loading and unloading materials for customers and from suppliers in the warehouse.

Mr Denning was also required to receive, check, dispatch and sort materials.

Mr Denning was required to use hand trolleys.

From time to time, during the Initial period, Mr Denning was required to operate a forklift truck.

During this period, Mr Denning generally worked from 6.00 am to 3.00 pm each day.

Mr Denning's remuneration consisted of $80.00 per day during the Initial period.

No superannuation contributions were paid on Mr Denning's remuneration on behalf of Mr Denning.

During the Initial period no tax was deducted from Mr Denning's pay.

During the Initial period, Mr Denning was not provided with payslips.

During the Initial period, Mr Denning did not sign a written contract of employment.

However, Mr Denning's terms and conditions of employment were governed by the Storemen and Packers, General (State) Award (Award).

Employment between 7 June 2006 and August 2006 (Second Period)

On 7 June 2006, Mr Denning signed a document entitled "Sub-Contractor Work Agreement" (Agreement).

The Agreement provided that Mr Denning would be paid at a rate of $459 per week, for a 45 hour week at $10.20 an hour (purportedly inclusive of GST).

The Respondent did not make superannuation contributions in respect of Mr Denning during the Second Period.

No tax was deducted from any payments made to Mr Denning by the Respondent during the Second Period.

The Respondent's accountant drafted the Agreement.

The Respondent's accountant was given authority by the Respondent to draft the Agreement with Mr Denning on the Respondent's behalf.

The Respondent's accountant says that he was not aware that it was inappropriate for the working arrangement between the Respondent and Mr Denning to be governed by the Agreement.

Although Mr Denning signed the Agreement, he continued to work primarily between 6:00am and 3:00pm.

However, during some weeks in the Second Period his hours fluctuated.

Mr Denning's employment with the Respondent during the Second Period continued to be governed by the Award.

Mr Denning was absent from work on two occasions due to illness during his engagement.

He was not paid any sick leave for these absences due to sickness.

He was not provided with payslips during the Second Period.

Mr Denning was not always paid on time.

Mr Denning often had to chase the Respondent for payment. He did this by speaking to Mr Ming Lee.

Mr Denning did not accrue or take annual leave during the Initial Period or the Second Period.

Mr Denning was given a written warning on 26 July 2006.

Mr Denning's engagement was terminated on or around 11 August 2006 for performance reasons.

Sham Contracting Arrangement

Mr Denning was an employee of the Respondent for the entire period from April/May 2006 until the termination of his employment on or around 11 August 2006.

Mr Denning's duties during the Second Period were the same as those performed during the Initial Period.

Mr Denning did not have an Australian Business Number.

Mr Denning was not asked to provide an Australian Business Number to the Respondent.

At no time was Mr Denning required by the Respondent to provide an invoice for the work that he performed.

During the Second Period, Mr Denning was paid his salary regardless of the fact that he did not provide an invoice.

Mr Denning paid no GST on the monies paid to him.

Mr Denning remained under the constant direction and supervision of the Respondent during the Second Period.

Mr Denning has stated that he signed the Agreement under duress.

Mr Denning understood that if he did not sign the Agreement he would not have a job with the Respondent.

No person employed by the Respondent or Mr Kulbeer Singh, explained to Mr Denning the terms of the Agreement.

No person employed by the Respondent or Mr Kulbeer Singh told Mr Denning that he was being hired as an independent contractor and not a permanent employee.

No person employed by the Respondent or Mr Kulbeer Singh told Mr Denning that he would be an independent contractor if he signed the Agreement.

On one occasion on 11 July 2006, Mr Denning had an accident whilst driving the company motor vehicle.

The Respondent paid for the damage caused.

The Respondent did not require that Mr Denning contribute to the damage caused by the accident.

Mr Denning did not have any personal insurance.

Mr Denning was never asked by the Respondent to provide a copy of a certificate of insurance.

The Applicant's investigation

Mr Singh and Mr Lee of the Respondent co-operated with the Applicant during the investigation into the breaches of the Award.

Following the investigation the Applicant concluded that Mr Denning was not a true independent contractor and had in fact been a casual employee of the Respondent and notified the Respondent of this.

The Applicant notified Mr Kulbeer Singh of the Respondent his belief that as a casual employee, Mr Denning's terms and conditions of employment should have been regulated by the Award.

The Respondent agreed to pay Mr Denning any monies that the Applicant advised the Respondent were owing to Mr Denning.

Settlement and payment of underpayments

Mr Denning sought advice from the CFMEU, which delayed settlement of the matter.

The matter was ultimately resolved between Mr Denning and the Respondent on the basis that Mr Denning was at all relevant times employed as a casual employee under the Award.

The Respondent agreed to make a negotiated payment, under the terms of a Deed of Release, dated 19 December 2006, of $4361.14 (gross) to Mr Denning, and to pay $873.10 in respect of superannuation contributions for the entire period of Mr Denning's employment from April/May 2006 until 11 August 2006.

The above payment included amounts in respect of underpayment of wages, penalty rates for overtime, weekend working and public holidays, and amounts for accrued but unpaid annual leave (and loading) and sick leave as well as unpaid superannuation contributions.

A net payment of $2,906.14 was paid to Mr Denning by the Respondent on 20 December 2006.

Underpayments and breaches of the Award

The Respondent failed to pay Mr Denning as a casual employee.

As a casual employee under the Award, Mr Denning was entitled to the following rates of pay:

(1) a rate of $10.70 per hour during the Initial Period he was employed as a casual employee for the ordinary hours of work. During this period, Mr Denning was actually paid $80 per day, which based on a 45 hour week, results in an approximate underpayment of $1.90 per hour;

(2) a rate of $10.70 per hour for the ordinary hours of work in the period between 7 June 2006 and 21 June 2006, when Mr Denning was 18 years old. During this period, Mr Denning was paid $459 per week for a 45 hour week and therefore there was an underpayment of $0.50 per hour.

(3) a rate of $12.67 per hour for the ordinary hours of work in the period 21 June 2006 (when Mr Denning turned 19) to August 2006. During this period, Mr Denning was paid $459 per week for a 45 hour week and therefore there was an underpayment of $2.47 per hour.

The Respondent failed to pay Mr Denning the 8.3% loading required instead of annual leave, to which Mr Denning would have been entitled as a casual employee pursuant to clause 10(iii) of the Award.

The Respondent failed to pay Mr Denning overtime at the rate of time and a half for 2.5 hours per week for the overtime hours that he worked between 6.00 am and 6.30 am (clause 16 of the Award).

Mr Denning's pattern of employment was such that he worked as a shift worker for the Respondent, having regard to his daily starting time of 6.00am. "Early Morning Shift", is defined at clause 11(i) of the Award as "any shift commencing at or after 4.00 am and before 6.30 am".

As such the Respondent failed to pay Mr Denning the shift penalty of 12.5% (under clause 11(vii)(a) of the Award).

The Respondent failed to pay overtime, to which Mr Denning was entitled in his capacity as a shift worker, at the rate of time and a half for those hours worked in excess of 38 hours per week (under clause 11(x)(b) of the Award).

The Respondent failed to pay Mr Denning forklift loading in accordance with clause 10(v) of the Award

The Respondent failed to pay statutory employer superannuation contributions for or on behalf of Mr Denning on any of the payments that he received.

However, a superannuation contribution of $873.10 was paid for the total wages earned during May to August 2006 as part of the settlement reached between Mr Denning and the Respondent.

The Respondent failed to provide Mr Denning with pay slips.

The Respondent failed to keep adequate employment records.

I have before me as evidence the affidavit of the applicant, Sundar Rajagopalan, filed on 21 May 2007 as well as two exhibits. Exhibit A1 is the agreed statement of facts already referred to and exhibit R1 is a letter dated 28 June 2007 from Mr Ming Lee, the general manager of the respondent company in which he raises matters in mitigation in relation to the imposition of penalties.

Counsel for the applicant presented submissions which, in addition to the agreed statement of facts, deal briefly with background information. I incorporate as background, paras.4.2 through to 6.1 of those written submissions:

Mr Denning commenced employment after the introduction of the amendments to the Act, arising from the Workplace Relations Amendment (Work Choices) Act 2005 (Cth).

Mr Denning was 18 years old when he commenced employment. His employment history can be summarised into two distinct periods namely:-

(a) Employment between April 2006 and 7 June 2006 whereby Mr Denning, whilst it is agreed that he was a casual employee under the Award. He was never paid in accordance with its terms (Refer to paragraphs 7-21 of the Agreed Facts) (Initial Period); and

(b) Employment between 7 June 2006 and August 2006 - During this period, the Respondent sought to engage Mr Denning pursuant to an independent contractor agreement in circumstances where the Respondent agrees that he was in fact a casual employee but was not paid in accordance with its terms (Refer to paragraphs 22-57 of the Agreed Facts) (Second Period).

The Award

The relevant award is the Storemen and Packers, General (State) Award (the Award).

The Award covers the activities of the Respondent, given that the Respondent's business falls within the scope of clause 39 of the Award, namely the Area, Incidence and Operation Clause (See paragraph 21 of the Agreed Facts).

The Award constitutes a Notional Agreement Preserving State Awards (NAPSA) within the meaning of Part 1 of Schedule 8 of the Act.

By operation of clause 34(1) and 34(2) of Schedule 8, the terms of the NAPSA between the Respondent and Mr Denning include the terms of the Award and any relevant State industrial law that determines, in whole or in part, a preserved entitlement.

Summary of breaches

The Applicant is seeking penalties with respect to breaches of the Award arising from:

(a) non-payment of annual leave loading for casual employees;

(b) non-payment of casual loading;

(c) non-payment of shift-work allowance;

(d) non-payment of the forklift allowance;

(e) non-payment of overtime;

(f) non-payment of superannuation; and

(g) non-compliance with required procedures under the Act.

The Applicant is not seeking compensation for the non-payments.

Clause 43 of Schedule 8 of the Act states that a NAPSA may be enforced as if it were a collective agreement within the meaning of the Act[1].

The Court may impose a penalty in accordance with Division 2 of Part 14 of the Act, if a person, bound by an applicable provision breaches the provision, pursuant to section 719 of the Act.

An applicable provision is defined to include a "collective agreement" pursuant to section 717 of the Act.

Breaches

The 8 breaches of the Award are set out in Annexure A to these submissions.

Counsel also presented submissions relating to the considerations relevant to a determination of the appropriateness of a penalty and the level of any penalty imposed. I accept those submissions and adopt with minor amendments paras.7.1 through to 8.2 of them.

The principal objects of the Act emphasise the importance of minimum standards and the importance of the enforcement of those standards: Section 3(f) of the Act.

As stated by Jarrett FM in Martin v W&K Crust Pty Ltd[2] at [56], Australian employees rely on those standards.

The penalty is set at a maximum of 300 penalty units and therefore the $33,000 for each breach. It is relevant to the Court's consideration that the maximum penalty has increased significantly in the last two years.[3]

Whilst there is no exact science in the fixing of the quantum of a penalty[4], relevant considerations for the Court in determining penalty include the non-exhaustive range referred to by Mowbray FM in Mason v Harrington Corporation Pty Ltd[5].

The Court should determine the penalty based on the totality principle, which requires consideration of the appropriateness of a pecuniary penalty having regard to the totality of the conduct rather than simply by the addition of each individual breach[6]

The nature and extent of the conduct which led to the breaches

The respondent has agreed that it repeatedly breached the Award and the Act during the initial and second period. Such breaches spread over a four month period, and arguably would have continued had Mr Denning's employment not have been terminated[7].

The respondent acted with complete disregard to its statutory obligations. There is no evidence that the respondent ever sought to understand its obligations when Mr Denning was initially employed. There was no misapprehension of its obligations. Further, when the respondent sought to record the terms of his engagement (after a three month period) the respondent sought to engage Mr Denning as a contractor, thereby depriving him of his rights to any employment protections, including superannuation, insurance, protection for unfair dismissal and his rights under the Award.

The respondent has admitted that Mr Denning was in reality an employee and that it breached numerous provisions of the Award and the Act.

The respondent has paid the applicant compensation to the value of $4361.14 (see the agreed statement of facts). Similar losses have been described as "significant" underpayments of wages by this Court.[8] For an employee of Mr Denning's age and experience this is a significant amount of money.

The fact of the respondent having made a payment as compensation to Mr Denning does not negate the compulsion on the Court to impose a penalty. The fact of a payment of compensation, like co-operation with the applicant, is relevant to the question of mitigation but does not lessen the need for sanction and deterrence.

The Court imposes penalties for breaches of industrial instruments. The penalty provisions do not require the existence of outstanding underpayments of entitlements: See ALHMWU v Dimension Cleaning Services[9].

Mr Denning was a young, vulnerable employee of the kind that could and was easily taken advantage of. At the time he was first employed, it is agreed he was 18 years of age. Membership of this vulnerable group is a significant factor in determining quantum[10]. A consideration of the terms of the contractor agreement demonstrate the vulnerability of Mr Denning.

Mr Denning told the applicant that he did not understand the contractor agreement and simply signed the document when he was asked to by the respondent. Mr Denning told the applicant he felt under duress to sign the agreement.

Whether there had been similar previous conduct by the respondent

There is no evidence in the agreed facts or the other evidence to indicate what the respondent did to determine their obligations under the workplace relations law and the Award. It is reasonable to infer that they did nothing.[11]

There is no evidence that the respondent had behaved similarly in the past. The respondent has not produced any evidence to demonstrate that it had been complying with its industrial obligations in respect of other employees but the applicant indicated to his counsel during the hearing that his investigation had not found any breaches in relation to other employees. The respondent's position is that it did not know it was in breach.

However, there is no evidence that the respondent has taken steps to ensure compliance with its industrial obligations subsequent to the applicant's investigation.

Section 719 of the Act requires that where two or more breaches of an applicable provision (here a term of the Award) are committed by the same person and arise out of a course of conduct by that person, they are to be treated for the purposes of s.719 as constituting a single breach of a term.

The principles to be applied in determining whether s.719(2) operates in this matter are established in a number of decisions considered under s.178(2) of the pre-reform Workplace Relations Act.

All of the eight breaches identified arise from separate provisions of the Award and with one exception dealt with below at [43] can be described as distinct as opposed to arising out of a single course of conduct[12].

The respondent has exhibited contrition. However, there is no evidence that the respondent has taken steps to ensure that it complies with the Act in the future. Reference in exhibit R1 to addressing "ignorance" of the legislation is not sufficient for the Court to give weight to it.

Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award.[13] 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. 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.

There is limited evidence as to the size of the respondent. There is no evidence of the annual profits of the company or the nature and extent of any related body corporate.

The effect the imposition of a penalty may or may not have on the respondent's business should not be taken into account when imposing the penalty.[14] This is particularly the case where the respondent has failed to adduce any proper evidence of such an effect.

The General Manager was involved and aware of the conditions Mr Denning was employed under. Although much of the administration of the business and the drafting of the agreement was organised by the accountant (who was a consultant), the General Manager was nonetheless the owner of the business and was aware of the contracting arrangement.

The penalty must reflect the need for general deterrence in the respondent's industry. The need for general deterrence is high in industries where young, low paid workers are engaged[15].

Special deterrence is necessary in this case. On one view, the fact that the Respondent has cooperated with the applicant and has paid Mr Denning compensation are factors which would go against the necessity for special deterrence in this case. However there is a need for special deterrence given that the respondent has not demonstrated it has taken appropriate corrective action with respect to its employment practices within its business generally.

Hypothetically, and leaving aside [25] above, the maximum applicable penalty in this case is eight breaches with $33,000.00 per breach, leading to a maximum penalty of $264,000.

A factor which should be taken into account in fixing the pecuniary penalties for multiple breaches is the totality principle. This matter was addressed in the Kelly case, where Tracey J recognised that there were differing views as to the correct starting point from which the principle should be applied. On the one hand, it may be appropriate to determine an aggregate penalty for all the breaches and then divide the total by the number of breaches. However, Tracey J concluded:

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.

The respondent was represented today by Mr Ming Lee, its general manager, by leave. I would not like it thought that indulgence granted pursuant to r.9.04 of the Federal Magistrates Court Rules 2001 (Cth) ("the Federal Magistrates Court Rules") and s.854 of the Workplace Relations Act should be generally granted. The Court expects that generally corporate parties before it will be represented by a legal practitioner. On this occasion I granted leave on the basis that if leave was not granted there would be nobody to speak on behalf of the respondent. In the result, Mr Lee said very little.

Essentially, the respondent admits the breaches and puts itself in the Court's hands as to the imposition of penalties, while raising the matters in mitigation in exhibit R1. Those matters are that this is the first known breach by this company. Secondly, the company has co-operated with the Office of Workplace Services and has promptly paid compensation to Mr Denning. The respondent seeks a lenient view in relation to this matter. The letter also says that the company has only $2 in paid up capital and a small retail outlet opened in April 2003. There are said to be four to five employees and that the business operated at a small profit in the 2005 financial year and a moderate loss in the 2006 financial year. Implicitly, the respondent is seeking to raise an inability to pay a substantial penalty. Mr Lee asserted that same financial embarrassment as the reason for not arranging legal representation.

I accept that the respondent has co-operated, has admitted the breaches and has made recompense to its wronged employee. I do not accept that special consideration should be given to the respondent on account of its financial circumstances of which there is no evidence, apart from the general assertions in exhibit R1. I do take into account that the breaches in this case involved only one employee and that there are other employees who are apparently employed in accordance with relevant legal obligations.

I have had regard in considering the exercise of the Court's discretion to impose penalties to other decisions of this Court and the Federal Court. In Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 the Court imposed penalties of $64,000 in relation to seven breaches of the Liquor and Allied Industries Catering Café Restaurant (ACT) Award where two employees were involved and no recompense had been made to them by the respondent. In Flattery v Zeffirelli's Pizza Restaurant [2007] FMCA 9, the Court awarded $50,000 in penalties in respect of eight breaches of the same award in relation to two employees who again had not been compensated prior to judgment.

In Cotis v Pow Juice Pty Ltd [2007] FMCA 140 the Court awarded penalties of $49,500 in respect of six breaches of an enterprise agreement where the breaches involved 14 employees who had been compensated in part by the respondent and where the remainder of the monies due to the employees had been dealt with by the Court at an interlocutory stage. In contrast, in Kelly v Fitzpatrick [2007] FCA 1080 the Federal Court awarded penalties of only $3,660 in respect of six breaches of the Transport Workers Award (1998) where only one employee was involved, where the employee had been compensated, where the employer had shown contrition and, importantly, where the employer had taken significant corrective action in the form of an audit of award compliance in order to seek to ensure that such breaches would not occur again.

The result in this matter falls some way between Kelly v Fitzpatrick and Pow Juice, Flattery and Mason. There was only one employee involved and he has been compensated. The employer has shown contrition. However, there was no evidence of effective corrective action being taken by the employer to prevent similar breaches occurring in the future. The breaches were serious and over a lengthy period. The respondent is a small business but I do not accept that small businesses should, by the simple fact of their size, be subject to a lesser penalty than big businesses. Neither do I accept that delicate financial circumstances excuse an employer from the imposition of significant penalties.

It is important that breaches of awards, enterprise agreements and the like be deterred. It is particularly important that deterrence be seen and acknowledged by persons who might otherwise display a cavalier attitude to their obligations. In all the circumstances I have come to the view that significant penalties should be imposed. I have taken into account, in addition to the factors already mentioned, the failure by the respondent to keep proper employment records. I have not imposed any penalty in relation to that failure because of concern about the possible inability of the applicant to sue for penalties in respect of that breach, given the period of the breach and the terms of the transitional provisions of the legislation.

Nevertheless, that failure, which is admitted, is a factor that can and should and has been taken into account in considering the matter generally under the totality principle. Employers who pay their employees inadequately and pay cash in hand and fail to keep records of employment are particularly at fault. Not only are they depriving employees of their entitlements, they are minimising the risk of detection and the proper calculation of compensation when their conduct is detected. They are probably also defrauding the Revenue. That conduct should be actively discouraged.

I will award only a single penalty for the third and fifth asserted breaches, on the basis of a concession by counsel for the applicant that those breaches probably arose from a single course of conduct.

Having regard to all the circumstances, I will make orders for the payment of penalties totalling $16,500 to be paid within 60 days and I hand down my orders.

I certify that the preceding forty-four (44) paragraphs are a true copy of the reasons for judgment of Driver FM

[1] The non-payment of annual leave loadings, personal leave and superannuation may be enforced under the Act because they are preserved notional entitlements within the meaning of clause 45(1) of Schedule 8 of the Act. The non-payment of a casual loading, whilst not preserved notional entitlements under the Act, is a preserved APCS pursuant to section 208 and is capable of being enforced. The non-payment of the shiftwork and forklift allowance or overtime are capable of being enforced as entitlements of the NAPSA which is not covered by the AFPCS, pursuant to clause 43 of Schedule 8 of the Act.

[2] [2007] FMCA 992

[3] See Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 at [22].

[4] See Trade Practices Commission v TNT Australia Pty Ltd [1995] ATPR 40,161 at 40,165 per Burchett J.

[5] [2007] FMCA 7 at [26] ff.

[6] See Australian Communications and Media Authority v Clarity 1 Pty Ltd [2006] FCA 1399 at [46] and Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 at [23].

[8] See Flattery v The Italian Eatery t/as Zeffirelli's [2007] FMCA 9 at [35] ($2,467.64, $2,584.53); See Kovacevic v Big Chip Pty Ltd (U02986123), 18 April 2007, ex tempore judgment, at [8] ($3,448). Cotis v Pow Juice Pty Ltd [2007] FMCA 140, at [82] ($5019)

[9] (1999) 86 IR 467 at 472 per Ryan JR. See also Gibbs v City of Altona (1988) 42 IR 255; Textile Clothing & Footwear Union of Australia v Lotus Cove Pty Ltd [2004] FCA 43.

[10] See Cotis v Pow Juice Pty Ltd [2007] FMCA 140, at [84]; Inspector Shacklock v MacFarlane and MacFarlane (No.W00102308), Chambers AJ, in the Victorian Magistrates Court at [28].

[12] Masters v Highway One Transport Pty Ltd (1990) 33 IR 1 at 4. See Cotis v Pow Juice Pty Ltd [2007] FMCA 140 at [42].

[13] Lynch v Buckley Sawmills Pty Ltd (1984) 3 FCR 503 at 508.

[14] _Cf Flattery at [42], [43], s_ee also Printing and Kindred Industries Union & Ors v Vista Paper Products Pty Ltd & Anor (1994) 127 ALR 673, at 687.

[15] See Kovacevic v Big Chip Pty Ltd (U02986123), 18 April 2007, ex tempore judgment, at [9]