Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557: Cleaning Company Penalised over Exploitation of Employees

Friday 9 June 2017 @ 8.49 a.m. | Industrial Law | Legal Research

In the recent case of Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557 (24 May 2017), the Fair Work Ombudsman (the Ombudsman) has secured near-record penalties of $447,300 against the operators of a Sydney-based cleaning company, with the Federal Court finding the company treated vulnerable employees as “slaves” under a “calculated” scheme.

Background to the Case

In 2011, the Ombudsman secured $4,400 in Court-issued fines against Rosario Pucci for his involvement in underpaying three employees – but Mr Pucci’s company Wash and Go Pty Ltd was placed into liquidation, preventing the Ombudsman from securing penalties against it.

At the commencement of 2014 in litigation against Grouped Property Services, the Ombudsman secured a freezing order, preventing the company from being stripped of assets or placed into liquidation, which would have frustrated back-pay orders.

In the latest litigation, the Court found Grouped Property Services deliberately exploited 51 workers, many from non-English speaking backgrounds. Most were engaged as cleaners, but some worked in clerical and other roles. They were individually underpaid amounts ranging from $58 to $23,474.

Grouped Property Services claimed that the 51 workers were employed by a purported labour-hire company National Contractors Pty Ltd. National Contractors was registered at the Grouped Property Services business address. The Ombudsman proved in Court that Grouped Property Services was the true employer of the workers and that National Contractors was merely a shell company set up by Grouped Property Services to avoid paying employees the minimum Award wages and entitlements that applied to their positions.

Instead, Grouped Property Services required workers to obtain ABNs and submit invoices for payment and then paid the workers arbitrarily determined low flat rates that undercut Award minimums – or in some instances paid them nothing at all. Three other purported labour hire companies that had formerly been registered at the Grouped Property Services business address had previously gone into liquidation.

The Current Penalties

Grouped Property Services Pty Ltd has been penalised $370,000 and also ordered to back-pay $223,244 to 49 employees it exploited between 2011 and 2013. Rosario Pucci (the former owner-operator of the company described by the Court as being “intimately involved” in the exploitation) has been penalised a further $74,300.

His brother Enrico Pucci, the company’s current owner and sole director, has been penalised $3,000 for his involvement in contravening the adverse action provision of the Fair Work Act 2009 (Cth) that makes it unlawful to dismiss an employee for exercising a workplace right, such as inquiring about payment of wages.

Comment and Reaction from the Ombudsman

Fair Work Ombudsman Natalie James said the case was one of the agency’s most complex matters:

“This matter involved dubious ‘labour hire’ arrangements, corporate structures and sham contracting arrangements that were used by a second time offender in a calculated attempt to avoid responsibility for vulnerable workers’ entitlements.”

Ms James welcomed the judgment and the freezing orders secured against Grouped Property Services saying it ought to be a warning to others who might seek to use complicated corporate structures to avoid their lawful obligations to their workers.

The Judgment

In handing down her Judgment, Justice Katzmann described the exploitation of the 51 employees as “serious”, finding that the contraventions were deliberate and part of a “scheme” and many of these employees were foreign nationals on temporary visas. Many had limited English language skills and were unlikely to have been familiar with Australian labour laws.

Her Honour said at [para 455]:

“… It was the result of a calculated attempt to avoid paying minimum award rates and statutory entitlements …”

And at [para 456]:

“Many, if not all, were struggling financially. Several had been unemployed for some time before securing work with the company. Some were treated by Grouped Property Services as slaves … On several occasions employees were dismissed for having the temerity to insist on receiving what they perceived to be their outstanding wages (substantially less than their due) before doing any more work … It is self-evident that Grouped Property Services profited from its exploitation of these employees.”

Justice Katzmann also found that the conduct caused the employees “considerable hardship”, with some giving evidence that underpayments caused them mental, emotional and financial stress and anxiety. Her Honour said at [para 458]:

“(One employee) was supporting her partner who was undergoing chemotherapy and when Grouped Property Services stopped paying her they struggled to survive.”

She also found that many workers had to borrow to meet household expenses and at least one went without food. One international student was forced to return home because he could not meet his expenses or afford to apply for another visa, while another student could not afford furniture and was forced to quit because he could not drive to various worksites after being unable to afford to renew his car registration with another worker struggled to pay bills and rent.

Justice Katzmann described Rosario Pucci’s treatment of various workers as being “inexcusable”, “disgraceful”, “reprehensible” and “shameful”. Her Honour also found Rosario Pucci threatened one Colombian student with deportation and forcibly removed another international student from Grouped Property Services’ office. Rosario Pucci had “a history of offending”, had been uncooperative with the Ombudsman and had shown no contrition.

Katzmann J also found that the “deeply troubling” evidence presented by the Ombudsman demonstrates that Grouped Property Services had last year engaged a Colombian student as a “contractor” – despite the fact the student was “undoubtedly an employee” – and then gave her “the run around” for several months, before finally paying her earlier this year.

Response from Grouped Property Services

Enrico Pucci says Grouped Property Services still believes the workers, who were employed to do work through labor-hire company National Contractors Pty Ltd, are not employees of the Grouped Property Services. Pucci maintains the staff in question were clearly not employed by Grouped Property Services, and all their paperwork including group certificates show this. The business is currently seeking legal advice about challenging the penalties, which Pucci says are “uncommercial”.

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Sources:

Sydney company ordered to pay $447,300 for underpaying workers but says it will challenge the penalties – smartcompany.com.au

Penalties of $447,300 and $223,000 back-pay ordered after workers treated as “slaves” – Fair Work Media Release

Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557 (24 May 2017)

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