The Federal Circuit Court has rebuked the Fair Work Ombudsman (FWO) for ‘naming and shaming’ respondents long before the hearing or a decision, in imposing a significantly lesser penalty on a Melbourne restaurant chain than the FWO sought for underpayments to employees.
The Meatball & Wine Bar operated three Italian restaurants in Melbourne. When the FWO investigated, the chain cooperated with the FWO, agreed that it had underpaid 26 workers just over $14,000 in overtime and penalty rates between July and October 2016, and rectified all underpayments swiftly.
Nevertheless, the FWO prosecuted the chain seeking civil penalties of between $121,500 and $140,940 for breaching the Restaurant Industry Award 2010. Even before an initial directions hearing in the matter, the FWO ‘named and shamed’ both the chain and its director, Mr Bruno, in a media release, which read:
A Melbourne restaurateur will face court after his company allegedly underpaid 26 workers including visa holders across three of his restaurants, despite having received professional advice on its wage obligations….
The Fair Work Ombudsman has commenced legal action in the Federal Circuit Court against Melbourne man Matteo Bruno and his company, The Meatball and Wine Bar Pty Ltd.
The FWO, which later discontinued the proceeding against Mr Bruno, asked the Court to find that the contraventions were deliberate because the chain had retained a workplace relations consultancy and received wage advice.
BEFORE THE COURT
The Court accepted, without the need for evidence, that casual employees are particularly vulnerable to contraventions and more susceptible to hardship than permanent employees.
It also accepted Mr Bruno’s unchallenged evidence that although the chain engaged a workplace consultancy business, it did not receive advice on the entitlements of the employees in question, contrary to the implication of the FWO’s press release.
Before the Court, the Meatball & Wine Bar attributed the following physical and reputational damage to the publication of the FWO’s media release:
- quarterly profit decline of more than $200,000;
- unprecedented property damage and vandalism at two of its restaurants;
- social media lampooning;
- removal from the ‘Best of Flinders Lane’ and ‘Good Food Guide’ publications; and
- loss of a lucrative retail opportunity at the Australian Open.
The Meatball & Wine Bar sought a low range penalty of between $31,320 and $44,280 to reflect the severity of the breaches and the FWO’s public shaming, relying on:
- its inadvertence in underpaying the workers in question;
- a lack of similar previous conduct;
- the size of the its business;
- its poor financial circumstances; and
- the adverse publicity it suffered after publication of the FWO’s media release.
The Court accepted that, although some adverse publicity associated with wrongdoing is inevitable and unsurprising, it will not ordinarily reduce the appropriate penalty. However, it also found that adverse publicity from ‘unfair or incorrect’ reporting may mitigate the civil penalty required.
Making clear its displeasure with the FWO’s approach, the Court said:
…this is a case where the [FWO] could have considered obtaining enforceable undertakings rather than seeking recourse through proceedings.
It took exception with the FWO’s media release, finding that it:
…made claims of deliberate wrongdoing against Mr Bruno and the [Meatball & Wine Bar] in circumstances where that allegation was challenged and … had not been determined by the Court. The matters were not reported as allegations but as a factual statement.
Noting the chain’s cooperation with the FWO’s investigation, which saved time and money for all involved, the Court discounted the penalty by more than 20% and imposed a penalty of $31,320, which coincided with the low end of the penalty range sought by the Meatball & Wine Bar.
In essence, the Court found that the FWO’s ‘unfair or incorrect’ reporting and consequent adverse publicity had already achieved the general deterrence for which a higher penalty might otherwise be required.
The decision should be of interest to any person the FWO has already ‘named and shamed’ in a media release before the case reaches a hearing, particularly at an early stage of the proceeding.
It is not clear, however, whether the FWO might look more favourably on a request to accept enforceable undertakings, rather than prosecute a claim, in any set of circumstances.
Beyond how businesses might manage their interactions with the FWO, the decision reinforces the need to interpret modern awards correctly, and the potential reputational impact of even inadvertent breach.
To discuss any modern award interpretation issue, please contact one of our team.
Disclaimer: This is general information only and is no substitute for legal advice.