Time after time: Re-offending directors and their cleaning company to pay hefty penalties for breaching FW Act

In a recent Federal Circuit Court decision, Fair Work Ombudsman v Commercial and Residential Cleaning Group Pty Ltd & Ors [2017] FCCA 2838, Judge Lucev ordered significant penalties against a Perth cleaning company and two of its directors.

The case concerned only three underpaid employees but resulted in more than $510,000 in penalties for contraventions of the Fair Work Act 2009 (Cth) (FW Act).

All three employees were Taiwanese nationals in Australia on working holiday visas with limited understanding of Australian workplace laws. It was found that their employer failed to pay them properly and withheld their entitlements on termination of employment. The Fair Work Ombudsman (FWO) had investigated the underpayments and found that the employer had also contravened the FW Act by failing to comply with pay slip obligations and failing to keep proper employment records.

The FWO claimed that throughout its 14-month investigation into the cleaning company, the directors were uncooperative and did not comply with its demands to view certain documentation. Once the FWO commenced litigation against the company and its directors, they admitted to the contraventions of the FW Act as alleged, but their admissions came very late in the process.

The task for Judge Lucev was to determine the appropriate penalties for the company and its directors, whom he found to be the controlling hands and minds of the company and therefore liable for the admitted contraventions. In reaching a decision, Judge Lucev considered a range of factors, including the circumstances of the employees and the past history of the company and its directors.

Judge Lucev found that the employees were vulnerable workers whose vulnerability was exploited by the company and its directors to gain an unfair competitive advantage. He commented that the company in particular obtained a benefit from underpaying the employees.

Of significance in this case was that the directors had a history of exploiting vulnerable workers. Judge Lucev noted that the directors and other companies run by the director had been the subject of many complaints, some dating back to 2006. One of the directors had also been ordered to pay penalties for contraventions of the FW Act in other proceedings and had not yet paid those penalties at the time of this decision.

Judge Lucev found that, as a result of the previous complaints and litigation, the directors had received advice about complying with workplace laws, but failed to live up to their obligations despite knowing better. In this context, Judge Lucev held the conduct of the company and the directors was deliberate in nature – that is, they repeatedly and knowingly exploited vulnerable workers to gain an unfair advantage over other businesses in the cleaning industry.

In total, the company and the directors were found to have committed 15 contraventions on the FW Act, all warranting some form of penalty.  

Judge Lucev said that there was a need for both general and specific deterrence in this case and that the small nature of the company should not limit the Court’s discretion in ordering penalties at the higher end of the spectrum. Specifically, Judge Lucev said,

Where it is necessary to impose a civil penalty it ought to be fixed at a level which ensures that the penalty cannot be regarded simply as part of an acceptable or usual cost of doing business.

Judge Lucev ordered the penalties to be fixed at 70% of the maximum available for the company and one of the directors. For the other director who was involved in previous litigation, Judge Lucev ordered that the penalties be set at 75% of the maximum.

This case is a good reminder of the seriousness with which employers should take approaches from the FWO and the hefty penalties that can follow if contraventions of the FW Act are litigated.

In considering the appropriate penalties to order, the Court will take particular notice of an employer’s prior dealings with the FWO and any previous advice it may have received about compliance with workplace law.  The Court approaches repeated contraventions of the FW Act seriously and the weight of the penalties it may order will not always be mitigated by the circumstances of the employer.

In this case, the two of the company directors were found personally liable and the possibility that they might find it difficult to pay the high penalties did not stop the Court from ordering those penalties.

Furthermore, this case was brought before the recent amendments to the FW Act and the introduction of higher penalties for “serious contraventions.” If this case had been brought after the amendments were enacted, it is possible that the penalties ordered by the Court would have been even higher.

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. Where applicable, liability is limited by a scheme approved under Professional Standards Legislation.

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