FWO prosecution of “Sushi Train” for unpaid wages and entitlements



Fair Work Ombudsman v Sanada Investments Pty Ltd [2010] FMCA 401 (9 June 2010)

The FMC decision above is useful in its summary of the relevant principles in prosecution of civil pecuniary penalties for unpaid wages and entitlements. The total amount of underpayments was $119,760.92 of which $29,739.14 was for employees who were either current or could be located.

The relevant penalty criteria:

57. I accept that the relevant considerations when fixing penalties in this case include:

a)      Nature and extent of the conduct;

b)      Circumstances in which the conduct took place;

c)       Nature and extent of any loss or damage;

d)      Similar previous conduct;

e)      Whether the breaches were properly distinct or arose out of one course of conduct;

f)       Size of the company;

g)      Deliberateness of the breach;

h)      Involvement of senior management;

i)        Corporation’s contrition, corrective action and cooperation with the enforcement authorities;

j)        Ensuring compliance with minimum standards by providing effective means for investigation enforcement of employee entitlements;

k)      Deterrence.

58. Compliance with the APCS and the provisions of the NAPSA is important and should not be ignored by employers. The applicant submits that the nature and extent of the respondent’s conduct was significant because:

a)      the underpayments related to 181 employees (these employees are listed at Annexure A);

b)      the breaches occurred over the period from 27 March 2006 and 28 January 2007 (the Relevant Period). which is a 10 month period; and

c)       the amount of the underpayments to the employees were significant and totalled $119,760.92.

59.  The relevant employees have been disadvantaged by the respondent’s failure to pay the correct wages and entitlements under the APCS and the NAPSA. I accept that there is nothing to indicate that the contraventions would have not continued had the applicant not conducted an investigation into the respondent in or about December, 2006.

60.  The employees affected were particularly vulnerable because:

a)      the employees typically included Japanese and Korean nationals holding working holiday visas;

b)      the employees were often transient employees that were employed by the respondent for a short period between 1 to 3 months;

c)       a number of the respondent’s workforce had limited knowledge of the English language.

61.  The total underpayment of $119,760.92 is a significant underpayment. The amount has been paid in part to the employees entitled to payments and the balance (in respect of employees not able to be found) has been paid to the Workplace Ombudsman Collector of Public Monies. I accept that this is a significant factor when assessing penalty.

62.  The employees who were unable to be located, however, have been particularly disadvantaged by the respondent’s failure to pay the correct wages and entitlements under the APCS and the NAPSA because they have not received their outstanding monies. In this respect, I consider that it is important to not give undue weight to the fact that the respondent has made a payment to the Workplace Ombudsman Collector of Public Monies, for employees that have not been located. Those employees are without their entitlements and that highlights the disadvantage to that group of employees. They have been deprived of the protection of the Act by the respondent’s conduct.

63.  The evidence with respect to the size of the company (or the size of each of the Sushi Train businesses) is limited. Ms Sanada gives evidence that the company operates three Sushi Train stores in Cairns and pays in excess $680,000 per annum in rent. It has a superannuation obligation to its eligible employees of $151,000 per annum (I presume it is per annum although her affidavit does not specify that period). Assuming a compulsory employer superannuation contribution of 9% per annum that would mean an annual payroll in respect of eligible employees in excess of $1,670,000. In addition, Ms Sanada swears that in 2007 the company sourced and used local produce to the value of $1,400,000. Thus, to cover its rent, wages, superannuation and local produce, the respondent’s turnover must be at least $3,800,000 per annum.

64.  Ms Sanada swears that the respondent is now one of the leading restaurant operators in Cairns, employing 38 full-time and part-time employees. Thus, it seems to be the case that the respondent is no small concern and has a sizable business interests.

65.  The respondent submits that it does not operate a large and highly profitable business. It submits that the catering industry in which the respondent operates is highly competitive. These submissions are, however, inconsistent with the evidence referred to above from Ms Sanada.

66.  She gives no evidence as to the profitability of the respondent’s business, although I would expect that she is in a position to do so.

67.  I accept the applicant’s submissions that regardless of the size of the business it does not absolve the respondent of its legal responsibility to comply with the law in relation to the employment of its employees:

68.  In Cotis v McPherson [2007] FMCA 2060 at para [17] Federal Magistrate Driver made clear that the issue of the deliberateness of the breaches is to be judged against something of a sliding scale where recklessness is as much a relevant factor as deliberate intention to breach:

  • In issue in this matter is whether the identified breaches were deliberate. I do not think that they were deliberate in the sense of Mr Macpherson setting out with an intention to breach the Workplace Relations Act. However, the facts compel the conclusion that Mr Macpherson was at least reckless in relation to the responsibilities of his company and himself as an employer. Mr Macpherson was made aware of some of the breaches by employees whilst the business was still in operation. He also acknowledged the breaches to the Inspector following the closure of the business. Mr Macpherson has no contest with the evidence provided by Ms Cotis.

69.  Ms Sanada gives evidence that she became in involved in the respondent’s business in 2004 when she became a director of the respondent. She says that the respondent has for “many years” had a General Manager. One of the responsibilities of the General Manager was to ensure that employees were paid their full entitlements by way of wages and other benefits. The respondent had a General Manager at the time of the offences. Ms Sanada does not say if that person is still in the employ of the respondent. The General Manager did not give evidence in these proceedings.

70.  Ms Sanada swears that at the time of the offences she had a limited knowledge of Australian law and her English skills were poor. She had the care of her teenage children, two of whom resided in Japan. She therefore spent much time travelling between Australia and Japan.

71.  She swears that she “relied a lot upon my General Manager and administrative staff and delegated most of the administrative work, including administering and managing pay rolls, to my office staff.”.

72.  She swears that during the period when the offences occurred, she was not aware that there were minimum rates of pay prescribed by the applicable Award. She was not even aware of the existence of Awards in Australia or the fact that there are minimum payments applicable to employees in Australia. She swears that she erroneously believed, during the period from 27 March 2006 to 28 January 2007 that the respondent’s employees had been correctly paid.

73.  The applicant submits that the respondent’s contraventions evidence at least a reckless disregard for its statutory obligations as an employer. I agree. That is the most benevolent view. There is no evidence about the involvement of the respondent’s senior managers in respect of the breaches. Given that Ms Sanada was moved to swear an affidavit which was filed by leave on the morning of the hearing, the absence of any direct evidence from the General Manager about the pay arrangements for the relevant period might lead to a more significant inference, but I do not draw that inference.

74.  The respondent has fully cooperated with the applicant throughout the investigation. Following the investigation and the audit conducted by the applicant, the respondent sought to rectify the total underpayments. In addition, the respondent has changed its practices by entering into a collective agreement with its employees which has ensured no further breaches have occurred.

75.  It is well established that deterrence is a relevant factor in the imposition of a penalty. The applicant referred me to the following passages about the significance of the role of general deterrence in determining the appropriate penalty:

Lander J. in Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543 at para 183:

In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend: Yardley v Betts (1979) 22 SASR 108. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is Imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty: R v Thompson (1975) 11 SASR 217.

Finkelstein J in CPSU v Telstra Corporation Limited [2001] FCA 1364; (2001) 108 IR 228 at [9]:

….even if there be no need for specific deterrence, there will be occasions when general deterrence must take priority, and in that case a penalty should be imposed to mark the law’s disapproval of the conduct in question, and act as a warning to others not to engage in similar conduct.

76.  I accept the applicant’s submissions that the court should have regard to the message sent, in the imposition of penalties, to employers and the community generally that underpayment of wages will not be tolerated and this is particularly the case where vulnerable employees are involved.


77.  In my view when all the factors are considered the breaches are in the moderate range of seriousness. These were vulnerable employees, many of whom are now without their entitlements even thought the respondent has sought to rectify the underpayments.

78.  The respondent points out that it has suffered adverse publicity in the Cairns area in relation to these matters, but there is no evidence about any effect that publicity has had upon the profitability of its businesses.

79.  In my view penalties for each of the four breaches should be assessed at $12,000 per breach or $48,000 in total. Taking into account the co-operation and admissions of the respondent from the outset of the investigations in this matter there should be a discount of 30% – the respondent’s co-operation was early and fulsome. Applying that discount, the penalty for each breach is $8,400.00.

80.  The aggregate penalty is $33,600.00. Given the evidence of Ms Sanada I have referred to above I do not consider that the aggregate penalty is likely to have a “crushing effect” upon the respondent. Her evidence is not to that effect.

81.  The respondent seeks time to pay. Again by reason of the evidence of Ms Sanada I am not satisfied that the respondent’s financial position is such that an overly long period is necessary. I will allow the respondent three months to pay.

82.  I make the orders set out at the commencement of these reasons.

Brisbane Barrister – David Cormack

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