Jailhouse Rock – Court orders jail term for owner-operator who failed to comply with orders resulting from Fair Work action

In June 2015, Judge Jarrett of the Federal Circuit Court of Australia found that a Northern Queensland-based tour company and its owner had underpaid five employees and contravened the Fair Work Act 2009 (Cth) (FW Act) (Fair Work Ombudsman v Trek North Tours & Anor (No.2) [2015] FCCA 1801).

Prior to commencing the Federal Circuit Court proceedings, the Fair Work Ombudsman (FWO) conducted an investigation into several complaints it received from employees and issued compliance notices to the company. The company failed to comply with those notices and a Fair Work Inspector reported that the owner said to her,

The compliance notices are rubbish. I have no intention of paying the money. I will have thousands of complaints against me before I do. The Fair Work Act reeks of fascism and I will never pay any of the money.

The company and the owner did not appear and were not represented in the Federal Circuit Court proceedings. As a result, a default judgement was entered against them. Understandably, Judge Jarrett described the company and the owner as “entirely uncooperative.”

The orders made by Judge Jarrett included:

  • The company was fined $55,000;
  • The owner-operator was fined $12,000;
  • The underpaid employees were to be paid their entitlements.

The penalties and back-pay were to be paid within 28 days of the Federal Circuit Court’s order.

In July 2015, Judge Jarrett made further orders freezing the assets of the company and the owner pending compliance with the earlier orders. The freezing orders were the result of an application by the FWO in which it outlined concerns that the owner might attempt to bankrupt the company to avoid paying the penalties or back-pay.

Following the freezing orders, the owner paid the penalty ordered against him personally but failed to pay the penalty against the company or back-pay the employees. The owner then moved money from two frozen company accounts into his family trust account.

This action triggered the FWO to commence contempt proceedings, claiming that the owner had failed to comply with the Federal Circuit Court’s orders.

On 10 May 2018, Judge Vasta of the Federal Court of Australia sentenced the owner to 12 months’ imprisonment for contempt of court for his failure to follow the Federal Circuit Court’s orders.

The owner appealed this outcome and a stay order was issued, granting the owner bail until a further hearing. The terms of the stay order included that the owner must:

  • surrender his passport;
  • not leave Queensland without permission;
  • report to Cairns Police Station each Wednesday and Saturday; and
  • reside at a known address.

This is the first contempt of court case run by the FWO and has resulted in the imposition of a prison sentence against a business owner.

Clearly, this case demonstrates the seriousness with which employers should take approaches from the FWO, particularly if those approaches involve potential litigation.

The FWO has powers beyond simply issuing compliance notices and, as the FWO, Natalie James has said, it is prepared to use every tool at its disposal – “This includes taking unprecedented new actions available to us across the legal framework such as this one.”

Shane Koelmeyer is a leading workplace relations lawyer and Director at Workplace Law. Workplace Law is a specialist law firm providing employers with legal advice, training and representation in all aspects of workplace relations, employment-related matters and WH&S.

02 9256 7500 | sydney@workplacelaw.com.au

Information provided in this blog is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this blog.

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