Fair Work Ombudsman v Kjoo Pty Ltd [2017] FCCA 3160 

Factual Background. The Fair Work Ombudsman ("FWO") brought proceedings in the Federal Circuit Court of Australia for contraventions of the Act and the Fair Work Regulations 2009 (Cth). The proceedings were brought against the operator of a sushi store, Kjoo Pty Ltd, its sole director/secretary, and its accountant/registered tax agent (collectively, the "respondents").

The respondents admitted the contraventions, which included failure to pay three employees prescribed minimum rates, and casual and weekend loading rates, in accordance with the Fast Food Industry Award 2010 ("Award"). The employees were underpaid a total of $51,025.84 between September 2014 and July 2015. This amount had been back-paid prior to the proceedings. The respondents also admitted to failing to make and keep records, to provide pay slips to employees and to knowingly creating and producing false and/or misleading records in response to a FWO notice to produce.

The three employees were Korean nationals on 417 (working holiday) visas. Their employment was facilitated by an "Internship Agreement" between Kjoo and a private college in Korea.

Legal Background. Under section 546 of the FW Act, the Court has the power to order payment of a pecuniary penalty for each of the admitted contraventions. Civil penalties aim to promote compliance with the legislation by being sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene. Additionally, Australian courts have emphasised the need for general deterrence in the fast food industry, where employees are frequently employed on a casual basis and are vulnerable due to their age, limited education and limited English language skills.

Under section 550 of the FW Act, a person who is involved in a civil remedy provision is taken to have contravened that provision. This includes a person who has aided, abetted, counselled, procured or induced the contravention, or been in any way, directly or indirectly, knowingly concerned in or party to the contravention, or has conspired with others to effect the contravention. This is known as "accessorial liability".

Decision. The Federal Circuit Court held that the respondents had contravened the civil remedy provisions. Kjoo was ordered to pay a penalty of $161,760. Kjoo's director/secretary and notably also accountant/tax agent were accessorily liable and were ordered to pay $32,352 and $4,608, respectively.

The Federal Circuit Court also held that the "Internship Agreement" was not a "vocational placement" within the meaning of the Act, and so did not preclude the requirement to pay prescribed minimum rates in accordance with the Award.

Lessons for Employers. This case demonstrates the commitment of the FWO and Australian courts to addressing contraventions of the Act. The significant penalties imposed on both Kjoo and the involved third parties are intended to deter employers from underpaying their employees and from non-compliance with the Act.