Penalties imposed on employer for underpayment of vulnerable employees
The Industrial Magistrates Court has imposed penalties on an employer for regular underpayments of two employees.
The respondent was a sole trader, who operated a hairdressing business trading at various locations. The claimant alleged that the respondent had breached the Hairdressers Award 1989 (WA) (the Award) in failing to maintain proper records and for failing to pay two employees their lawful entitlements pursuant to the Award during their periods of employment.
The claimant alleged that the respondent underpaid one employee $23,944.35, by contravening the Award on 242 occasions; and underpaid another employee $53,414.73, by contravening the Award on 400 separate occasions.
In addition to seeking orders that the respondent pay the underpayments owing to the employees, the claimant also sought penalties and costs. The claimant submitted that the underpayments were substantial, and the respondent’s failure to keep or provide records meant that the entitlements claimed were only part of the total underpayments. The claimant submitted that the employees, being migrant workers on visas with limited command of English, were vulnerable.
The claimant submitted that the respondent did not cooperate with industrial inspectors investigating the contraventions and had not taken action to correct the underpayments of the employees. The claimant contends that the respondent’s disregard for his legal obligations to his employees was at the serious end of the spectrum and contended that the Court should consider a significant penalty in respect to the contraventions in the interest of deterrence.
The claimant noted that, while the Full Bench of the Commission in the decision of Callan v Smith  WAIRC 216 adjusted the assessment of penalties by 40% considering the overlap between separate contraventions, in the assessment of this matter, regard should be given to the business model applied by the respondent.
The respondent did not provide any submissions to the Court in respect to the application for penalties and costs.
The Industrial Magistrate considered the non-exhaustive range of factors set out by Mowbray FM in Mason v Harrington Corporation Pty Ltd  FMCA 7, and adopted in Kelly v Fitzpatrick  FCA 1080; (2007) 166 IR 14 to determine whether the conduct calls for the imposition of the penalty and if so, the amount, these being:
- The nature and extent of the conduct which led to the breaches;
- Circumstances in which the conduct took place;
- The nature and extent of any loss or damage sustained because of the breaches;
- Whether there has been any similar previous conduct by the respondent;
- Whether the breaches are properly distinct or arose out of one course of conduct;
- The size of the business involved;
- Whether or not the breaches were deliberate;
- Whether senior management was involved in the breaches;
- Whether the party committing the breach had exhibited contrition;
- Whether the party committing the breach has taken corrective action;
- Whether the party committing the breach had cooperated with enforcement authorities; and
- The need for specific and general deterrence.
The Industrial Magistrate noted that the role of the Court is to fix a penalty appropriate to the circumstances in which the contravention occurs, and the need to maintain public confidence in the statutory regime. The Industrial Magistrate determined that the separate contraventions could be considered as a single course of conduct, and as such, the penalties required a 40% reduction for each contravention. In considering the above factors, and with a 40% reduction applied, the Industrial Magistrate ordered that a penalty of $15,228 and $27,576 be paid for the underpayments. The Industrial Magistrate additionally ordered the respondent pay the claimant costs of $82.50.
The decision can be read here.