Fair Work Ombudsman v NSH North Pty Ltd [2017] FCA 1301

Factual Background. The Fair Work Ombudsman ("FWO") brought civil penalty proceedings in the Federal Court of Australia ("Court") for contraventions of employment law obligations under the FW Act. The proceedings were brought against NSH North Pty Ltd ("NSHN"), a restaurant trading as New Shanghai Charlestown, and NSHN's sole director/shareholder, HR manager and store manager (collectively, "respondents"). 

The primary contraventions involved systematic failures to pay employees their proper entitlements under the Restaurant Industry Award 2010 ("Award"), including underpayment of $583,688.68 to 85 employees over a period of 16 months. The underpayment included failures to pay prescribed minimum rates of pay, casual loadings, penalty rates, overtime rates and superannuation contributions in accordance with the Award. The FWO also alleged contraventions relating to false employment records (including time and wage records) that were created and produced on behalf of NSHN and the respondents in response to a FWO notice to produce. The respondents admitted the key contraventions. 

Legal Background. Under section 550 of the FW Act, a person who is "involved in" a contravention of a civil penalty provision is taken to have also contravened that provision. A person is "involved in" a contravention if the person has aided, abetted, counselled, procured, induced, conspired with others or been knowingly concerned in or party to the contravention. This is known as "accessorial liability".

In Australia, civil penalties attempt to put a price on contravention of the law. The penalties should be sufficiently high to deter further contraventions by the contravener and others who might be tempted to contravene the law. In addition, the penalties should send a message that contraventions of the law are serious and unacceptable, and they should be appropriate and proportionate to the contraventions viewed as a whole. 

Decision. The Court held that NSHN had contravened the FW Act as alleged by the FWO and that the individual respondents were accessorily liable for NSHN's contraventions. The Court ordered NSHN to pay employees their unpaid entitlements and also imposed a civil penalty in the amount of $301,920. In addition, the Court imposed civil penalties on the sole director/shareholder ($54,672), the HR manager ($21,760) and the store manager ($18,496).

The HR manager submitted that she was a holder of a 457 Visa sponsored by a related company of NSHN. She said that throughout her employment as HR manager, she was mindful that her residential visa status was dependent on her continued employment with NSHN. However, the Court dismissed the HR manager's submission that she was in a "parallel position of vulnerability" to that of the other NSHN employees because they were both from a non-English speaking background and also worked in Australia on 457 Visas. The Court said, "the comparison is not apt. A distinction must be drawn between vulnerability to being exploited, which is a position of victimhood, and supposed vulnerability by way of reduced ability to resist participation in illegal activity, which is a position of participation". 

Lessons for Employers. This case demonstrates the FWO's and the Court's determination to address and impose significant civil penalties on employers and third parties (such as HR managers and store managers) who are involved in the underpayment of employees.