FEDERAL COURT OF AUSTRALIA United Voice v Lloyds Services ACT Pty Ltd [2017] FCA 1007 File number(s): ACD 132 of 2015 Judge(s): JAGOT J Date of judgment: 1 September 2017 Catchwords: INDUSTRIAL LAW – first and second respondents contravened provisions of the Fair Work Act 2009 (Cth) –pecuniary penalties under the Fair Work Act 2009 (Cth) Legislation: Fair Work Act 2009 (Cth) ss 50, 536, 345, 557 Cases cited: Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 326 ALR 476 Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557 Sayed v Construction, Forestry, Mining and Energy Union (2016) 239 FCR 336; [2016] FCAFC 4 United Voice v Phillip Cleaning Service Pty Ltd [2017] FCA 392 Date of hearing: 3 August 2017 Registry: Australian Capital Territory Division: Fair Work Division National Practice Area: Employment & Industrial Relations Category: Catchwords Number of paragraphs: 19 Counsel for the Applicants: Mr O Fagir Solicitor for the Applicants: Mr S Russell-Uren of United Voice Counsel for the Respondents: Mr D Allen Solicitor for the Respondents: Kekatos Lawyers ORDERS ACD 132 of 2015 BETWEEN: UNITED VOICE First Applicant NEEKA MWEE Second Applicant EH HTOO GYI (and others named in the Schedule) Third Applicant AND: LLOYDS SERVICES ACT PTY LTD First Respondent ANGELO DI DIO Second Respondent JUDGE: JAGOT J DATE OF ORDER: 1 SEPTEMBER 2017 THE COURT ORDERS THAT: 1. The first respondent pay a pecuniary penalty of $110,000 for its contraventions of ss 50, 345(1) and 536(2)(b) of the Fair Work Act 2009 (Cth). 2. The second respondent pay a pecuniary penalty of $20,000 for his contraventions of ss 50, 345(1) and 536(2)(b) of the Fair Work Act 2009 (Cth). 3. The pecuniary penalties be paid to the first applicant, United Voice, within 28 days. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT JAGOT J: 1 These reasons for judgment concern penalties to be imposed on the respondents for contraventions of the Fair Work Act 2009 (Cth) as found in my principal judgment, United Voice v Phillip Cleaning Service Pty Ltd [2017] FCA 392. At [50] of my principal judgment I found that: PCS and Mr Di Dio have each contravened: (1) s 50 of the Fair Work Act by: (a) failing to pay employees their ordinary rate of pay for their usual hours worked during each period of school holidays; (b) failing to have regard to the language skills of the fourth to sixth and eighth applicants in preparing their letters of appointment; (c) not providing any employee with an off-site induction; and (d) not paying the third, fourth, tenth, fourteen, fifteenth and twenty-second applicants a 17.5% loading on their ordinary pay in respect of the annual leave which they took in December 2015, in breach of a provision or provisions of the Phillip Cleaning Services and LHMU Clean Start Union Collective Agreement 2010 for ACT Government Schools which is an enterprise agreement within the meaning of s 50 of the Fair Work Act; (2) s 345 of the Fair Work Act by knowingly making a false and misleading representation to the fourth to sixth and eighth applicants in their letters of appointment about their workplace rights; (3) s 536(2)(b) of the Fair Work Act by not providing employees with a payslip identifying their employer and employer's ABN in the periods of about 26 October 2010 and 19 December 2011, August 2012 and June 2013, and 2 December 2014 and 24 February 2015. 2 These reasons are to be read with my principal judgment. I continue to use the terms defined in the principal judgment in these reasons, albeit recognising that the first respondent has since changed its name to Lloyd's Cleaning ACT Pty Ltd. 3 Subsequent to the principal judgment the respondents have carried out or failed to carry out certain acts which persuade me that the considerations of deterrence, both specific and general, are of particular significance in the present case. They also persuade me that the respondents continue to refuse to acknowledge their responsibility for the contraventions or any obligation to rectify them. As such, it is not merely that the respondents cannot be found to be contrite; the respondents may be inferred to have deliberately taken steps to place their assets beyond the reach of the applicants who have been systematically underpaid as a result of Mr Di Dio's view, as found at [14] of the principal judgment, that he "felt entitled to run PCS as he thought fit irrespective of any legal obligations of PCS to its employees". 4 Given their conduct it may come as no surprise that the respondents have not paid the moneys found to be owed to the applicants. Further, as the applicants submitted, the additional evidence establishes that: (a) On 27 May 2016, immediately before the filing of the defence, charges over all PCS property were registered in favour of two Cassiniti entities, Accolade Advisory and Reliance Financial Services. (b) On 22 June 2016, immediately after filing the defence, a further charge over all PCS property was registered in favour of Reliance Financial Services. (c) On 21 April 2017, that is the date of the Decision, Mr Di Dio transferred real estate owned by him to his wife. The transfer instrument was witnessed by Mr Cassiniti. (d) On 1 May 2017 Mr Di Dio changed the name of the first respondent to "Lloyd's Cleaning ACT Pty Ltd". (e) On 18 July 2017 a caveat over real estate owned by Mr Di Dio and his wife as joint tenants was registered in in favour of Accolade Advisory. 5 The evidence also establishes that Accolade Advisory and Reliance Financial Services are two of the Cassiniti organisations who are alleged to have been owed substantial debts by the corporations which Mr Di Dio established in a failed attempt to maintain that PCS did not employee the employees. As explained in the principal judgment at [9]: I do not accept that Mr Di Dio thought that a company other than PCS employed the employees at any time. I consider that the objective evidence discloses that Mr Di Dio knew at all material times that PCS employed the employees. At best, Mr Di Dio might have hoped that the structure he created using other companies might have shielded PCS from its obligations as an employer and that he was willing to see if this strategy would work if tested. If it worked, it would best serve his purposes and those of PCS to avoid legal obligations to the employers by PCS. If it did not work, PCS and he were in no different a position from that which they otherwise would have been in. In other words, Mr Di Dio's use of labour hire companies in an attempt to shield PCS from its obligations as an employer is an example of opportunism which, I am satisfied, Mr Di Dio was willing to extend to the respondents' defence of these proceedings. 6 As the applicants also submitted, the respondents may be inferred to have disregarded the findings against them in the principal judgment at [42]-[46] for issuing payslips which did not identify PCS as the employee and failing to pay the correct leave loading to some employees because: On around 28 June 2017 PCS issued to its employees payslips and group certificates. Each employee apparently received two group certificates, the first nominating as their employer the "Phillips Cleaning Trust" and the second the "Phillips Cleaning No. 1 Dis Trust" [sic]. At around the same time PCS paid its employees accrued annual leave. The leave was paid for at the base rate of pay applicable under the Agreement…No redundancy payments have been made. 7 The principles relevant to the assessment of a civil penalty were not in issue. The orthodox approach to a civil penalty recognises that the primary object is deterrence which means that the penalty must be fixed at a level which ensures that it cannot be regarded as a mere cost of doing business (Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 326 ALR 476; at [55]). 8 Otherwise, I accept the following submissions for the applicants: (1) Not only have the respondents failed to demonstrate contrition or cooperation but the case falls at the extreme opposite end of the spectrum. The respondents relied on untenable defences, unnecessarily extended the length and expense of the hearing, have failed to pay what they owe the applicants as a result of systematic underpayments, and took steps after the principal judgment consistent with an intention to place assets beyond the applicants' reach. (2) Mr Di Dio appears wholly unrepentant. He did not take the opportunity to give evidence and thus it must be inferred that any evidence which he could give would not have assisted him. (3) "…the contraventions involved the exploitation and underpayment of vulnerable workers. The Employees are the archetype of vulnerable employees. They have limited English and limited insight into the workings of the Australian industrial system. Having obtained asylum in Australia they should have enjoyed the benefits of the Australian system of workplace laws, designed as they are to prevent exploitation and ensure a measure of wage justice to all workers". (4) "…the failure to pay for school holidays occurred in circumstances where the Respondents, the union and the ACT Government had cooperated to address an issue caused by the introduction of the modern award. As part of that arrangement, the cleaning contracts were restructured and the ACT Government paid PCS an amount sufficient to ensure that employees were paid during the school holidays…[this] was a deliberate effort to arrogate to the respondents public money intended to be paid to the employees". (5) "…the financial contraventions involved the underpayment of some $250,000. They were, in the context of a low-paid part-time workforce, substantial". (6) The respondents' defence "was fundamentally dishonest. It relied on a proposition [which] the respondents did not believe to be true, viz, that PCS was not the employer of the employees". (7) "…there is a need for general deterrence both having regard to the nature of the contraventions and the character of the industry". 9 While I accept that the non-financial contraventions were also serious given that they involved repeated breaches of provisions designed to educate workers about their industrial rights, which are of particular importance "in the context of the contract cleaning industry typically populated by workers who are ill-informed as to their industrial rights", I am not satisfied those breaches may be described as "contumelious" if, by that, any colour of deliberate intent to flout the authority of the court is intended. The same cannot be said of the failure to pay the amounts owed and subsequent steps taken to place assets beyond the reach of the applicants, which must be intended to undermine the authority of the court. 10 Given that the respondents adduced no evidence in relation to the assessment of penalty, I accept the applicants' submission that the only potentially mitigating factors are that PCS is a relatively small enterprise in which Mr Di Dio was responsible for all decisions, PCS has no record of prior contraventions, and it appears that it has no active cleaning contracts. 11 The applicants' submissions also conveniently summarised the circumstances relevant to the maximum penalties for the contraventions, which I adopt (subject to some minor corrections): (a) The applicable rate of penalty unit is that applying at the time of the contravention: Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557 at [394]–[395] (GPS No. 2). (b) Where a contravention occurred both before and after an increase in the amount of a penalty unit, the higher amount is apt: GPS No. 2 at [396]–[398]. (c) A penalty unit was $170 from 28 December 2012 [Crimes Legislation Amendment (Serious Drugs, Identity Crime and Other Measures) Act 2012 (Cth), Schedule 3 Part 2] and $180 from 31 July 2015 [Crimes Legislation Amendment (Penalty Unit) Act 2015 (Cth), Schedule 1]. (d) The maximum penalties for an individual for each contravention are set out in the table in s539 of the FW Act. The maximum penalty for a corporation is five times the maximum payable by an individual: s546(2)(b). (e) The effect of s557(1) of the FW Act is that contraventions of the kinds listed in s557(2) which affect multiple employees are to be treated as a single contravention: GPS No. 2 at [394]–[395]. (f) The s345 contraventions (Contravention 2) are not subject to "grouping": s557(2). (g) In the present case, the holiday underpayments (Contravention 1) and payslip contraventions (Contravention 5) occurred before and after 31 July 2015 and the penalty unit amount in respect of those contraventions is $180. The contraventions related to letters of appointment (Contraventions 2 and 3) inductions (Contravention 4) and leave loading (Contravention 6) all occurred before 31 July 2015 and the applicable penalty unit amount in respect of those contraventions is $170. 12 Accordingly, the maximum penalties are as follows for the contraventions (based on the submissions for the applicants, which the respondents did not contradict): (1) s 50 Fair Work Act: failing to pay employees their ordinary rate of pay for their usual hours worked during each period of school holidays – 21 contraventions required to be grouped by s 557(2): 300 units for PCS ($54,000) and 60 units for Mr Di Dio ($10,800). (2) s 50 Fair Work Act: failing to have regard to the language skills of the fourth to sixth and eighth applicants in preparing their letters of appointment – 4 contraventions required to be grouped by s 557(2): 300 units for PCS ($51,000) and 60 units for Mr Di Dio ($10,200). (3) s 50 Fair Work Act: not providing any employee with an off-site induction– 13 contraventions required to be grouped by s 557(2): 300 units for PCS ($51,000) and 60 units for Mr Di Dio ($10,200). (4) s 50 Fair Work Act: not paying the third, fourth, tenth, fourteen, fifteenth and twenty-second applicants a 17.5% loading on their ordinary pay in respect of the annual leave which they took in December 2015 – 6 contraventions required to be grouped by s 557(2): 300 units for PCS ($51,000) and 60 units for Mr Di Dio ($10,200). (5) s 345(1) Fair Work Act: knowingly making a false and misleading representation to the fourth to sixth and eighth applicants in their letters of appointment about their workplace rights – 4 contraventions not required to be grouped by s 557(2): 300 units for PCS per contravention ($51,000 x 4 = $204,000) and 60 units for Mr Di Dio per contravention ($10,200 x 4 = $40,800). (6) s 536(2)(b) Fair Work Act: not providing employees with a payslip identifying their employer and employer's ABN in the periods of about 26 October 2010 and 19 December 2011, August 2012 and June 2013, and 2 December 2014 and 24 February 2015 – 21 contraventions required to be grouped by s 557(2): 150 units for PCS ($27,000) and 30 units for Mr Di Dio ($5,400). 13 The applicants submit that the penalties should be imposed as follows: Contravention PCS Mr Di Dio s 50: ordinary rate of pay $45,900 $10,800 85% maximum 100% maximum s 50: letters of appointment $30,000 $6,630 59% maximum 65% maximum s 50: no off-site induction $30,000 $6,630 59% maximum 65% maximum s 50: incorrect leave loading $30,000 $5,100 59% maximum 50% maximum s 345(1): workplace rights $101,000 $20,400 misrepresentation 49.5% maximum 50% maximum s 536(2)(b): payslips $25,000 $4,860 91% maximum 90% maximum Total before totality principle $261,900 $54,420 Total after totality principle $220,000 $54,420 14 While I accept that some of the contraventions are serious and the respondents can give be given no credit for any ameliorating conduct on their part, I consider a number of these penalties to be too severe for a number of reasons. 15 First, while I cannot find that PCS is simply Mr Di Dio's alter ego there is a close relationship between them. While the penalties imposed must be appropriate to the objective seriousness and circumstances of each respondent, this relationship is not irrelevant. 16 Second, not all of the contraventions are of equal severity. (1) I accept that the failure to pay the employees during school holidays is objectively serious and warrants a penalty at the higher end of the scale. (2) The contraventions relating to the preparation of the letters of appointment are explained at [29]-[30] of the principal judgment. The difficulty I have in characterising these contraventions as serious is that the obligation in cl 16.1 of the Agreement, to have regard to the language skills of the employee in preparing any letter of appointment, is itself vague. The clause did not require the letter to be written in the employee's first language. It did not require the letter to be translated for the employee. It did not require PCS to offer a translation service at the employee's election. As such, it is difficult to gauge the adverse consequences of the contraventions. (3) The respondents' failure to provide an off-site induction to any employee should not be regarded as a serious contravention. It was not apparent from the evidence that this caused any particular hardship to any employee. It is an example of Mr Di Dio doing as he saw fit regardless of his obligations but the contraventions have had no adverse consequence. While not a mere technical or minor breach, the penalties should reflect the relative lack of seriousness of these contraventions. (4) The incorrect leave loading, as the applicants acknowledged, was based on a view of the Agreement that was reasonably open. While I found in the applicants' favour the operation of the Agreement in respect of payment of leave loading, as explained at [45] of the principal judgment, was ambiguous. As such, I do not consider these contraventions to be approaching or at the serious end of the scale. (5) The workplace rights misrepresentations are explained at [33] of the principal judgment. The respondents knew the letters of appointment were inaccurate in referring to the Cleaning Services Award 2010 after the Agreement came into force on 1 May 2011 but I cannot go so far as to infer that the inaccuracy was intended to give the respondents an illegitimate advantage. The inaccuracy was a reflection of Mr Di Dio's overall high handed approach and indifference to his employees' rights but I do not judge the objective seriousness of the contravention as grave as the applicants would have it. It is true that identification of the Agreement as the source of workplace rights and obligations was fundamental to the employment relationship but as I said at [35] of the principal judgment "Mr Di Dio's explanations of mistake, oversight or error on his part may be accepted to the extent that he knew the information in the letters was wrong from 1 May 2011 but did not change the information because he did not bother to focus on the error and correct it until recently". (6) The payslips contraventions were part of a failed scheme by the respondents to enable PCS to avoid its responsibilities as an employer. As noted at [43] of the principal judgment, the payslips did not identify PCS as the employer as a result of PCS's self-interest irrespective of its legal obligations. I accept these contraventions are serious. 17 Having regard to these considerations, I consider that the following penalties reflect the objective seriousness of the contraventions and the overall circumstances of each respondent: Contravention PCS Mr Di Dio s 50: ordinary rate of pay $27,000 $5,400 50% maximum 50% maximum s 50: letters of appointment $5,100 $1,020 10% maximum 10% maximum s 50: no off-site induction $7,650 $1,530 15% maximum 15% maximum s 50: incorrect leave loading $5,100 $1,020 10% maximum 10% maximum s 345(1): workplace rights $51,000 $10,200 misrepresentation 25% maximum 25% maximum s 536(2)(b): payslips $18,900 $3,780 70% maximum 70% maximum Total before totality principle $114,750 $22,950 18 I accept that, in respect of each respondent, the principle of totality should be applied. As a result, it is necessary to consider whether the penalties in total properly reflect and do not exceed the overall culpability of the respondents. This is particularly important in a case such as the present where all of the contraventions relate to the same employment relationships between PCS and its employees. Taking this into account, I consider that there should be a relatively small adjustment of the total penalties, so that PCS will be subject to a penalty for all contraventions in the sum of $110,000 and Mr Di Dio $20,000. 19 The first applicant, United Voice, sought payment of the penalties to it, relying on Sayed v Construction, Forestry, Mining and Energy Union (2016) 239 FCR 336; [2016] FCAFC 4 at [89]-[112] and s 546(3)(b) of the Fair Work Act. Consistent with the principles in Sayed, this is not a case where United Voice might gain a windfall by being paid the penalty. It has prosecuted the proceeding, at no doubt great expense, to enforce the law on behalf of a group of employees vulnerable to exploitation. The penalties should be paid to the first applicant. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. Associate: Dated: 1 September 2017 SCHEDULE OF PARTIES ACD 132 of 2015 Applicants Fourth Applicant: JOHNSON MOE JOE Fifth Applicant: SAW KYAW MYINT SAW Sixth Applicant: BO RA KHAY YU Seventh Applicant: BRUCE KELTIE Eighth Applicant: HTOO YWAI Ninth Applicant: SAW LAY GAY SOE Tenth Applicant: JULIA DAH Eleventh Applicant: EH DAH Twelfth Applicant: JIRAYU MANEESIRAWONG Thirteenth Applicant: THA WEIN KHAY YU Fourteenth Applicant: PAW PA YWEL Fifteenth Applicant: TAR WAR Sixteenth Applicant: NAY KER PAH EH Eighteenth Applicant: KAW MU TAW GAY Nineteenth Applicant: EH TAR MOO Twentieth Applicant: EH KER LER