Jillian Dixon (the claimant), an industrial inspector with the Department of Mines, Industry Regulation and Safety, brought proceedings against Kahraman Karakuyu and Done Karakuyu (the respondents), proprietors of Newroz Kebab & Turkish Bakery (Newroz) in East Perth. Findings on liability were made by the Court [link] in respect of the respondent’s failure to keep employment records in accordance with the requirements of s 49D(2) of the Industrial Relations Act 1979 (WA) (IR Act), as well as numerous breaches of the Restaurant, Tearoom and Catering Workers’ Award (award). It was found that the respondents:

• contravened the requirements under s 49D(2) to keep employment records on 738 separate occasions between 19 December 2016 and 31 December 2018 (records contraventions); and
• during the same period, breached the award 392 times (award breaches) which resulted in Mr Zeyrek being underpaid, in respect of which the Court ordered the respondents to pay the sum of $102,483.74 (underpayment amount).

The claimant submitted that the respondent had engaged in ‘wage theft’, involving the systematic and deliberate underpayment of a vulnerable worker in the hospitality industry. Noting the number of contraventions, the objective seriousness of these contraventions and the need for general deterrence, particularly in response to the reported prevalence of wage theft in the hospitality industry, the claimant submitted a penalty in the upper range to be appropriate. 

The respondents submitted that Newroz operated mainly as a family business, with most work performed by family members, and they were not involved in the day-to-day operations. They argued that any contraventions were due to carelessness or ignorance, not intentional or deliberate actions, and that they believed they were treating Mr. Zeyrek fairly and lawfully. Additionally, they contended that there was no need for specific deterrence as they no longer operate a business or employ anyone.

The Industrial Magistrate considered the parties’ submissions alongside the various findings made in the liability decision and applied established principles to determine the appropriate penalties. The records contraventions and award breaches were dealt with separately.

Records Contraventions

When applying the principles set out in Callan v Smith [2021] WAIRC 00216, the Court noted that a maximum aggregated penalty for each of the records contraventions would be very large. His Honour concluded that if the more appropriate penalty of $1,500 for each contravention was imposed, a total aggregate penalty in this amount would not be a just and proportionate response. Having regard to the ‘one transaction principle’, the records contraventions were grouped together to set a theoretical maximum penalty by reference to the pattern of conduct that was committed week to week. This was to ensure that the aggregate penalty to be imposed was neither crushing nor oppressive and that there would be no double penalty. Given this, the Industrial Magistrate imposed a penalty of $1,500 for each of the 106 pay periods that fell during the contravention period, equating to a theoretical aggregate penalty of $159,000.

Due to the respondents having admitted the records contraventions, the Industrial Magistrate considered a 20% reduction to this amount appropriate. The totality principle was also applied to reduce the amount by a further 40%. This resulted in a total penalty of $76,320 for the records contraventions.

Award Breaches

The Industrial Magistrate noted that the award breaches committed by the respondents were serious, for which the Court should impose stiff penalties. However, when applying the principles in Callan v Smith, the total theoretical maximum penalty for the award breaches would also be very large. His Honour considered that a penalty of $300 per award breach, resulting in an overall theoretical aggregate penalty of $117,600, be appropriate.

Although committed as part of a single, continuous course of conduct, the amounts of the underpayments were such that His Honour did not consider it appropriate to apply the one transaction principle by grouping the award breaches together to reduce the penalty amount. A 20% reduction was however given due to the effort the respondents had made towards rectifying the underpayment amount. The totality principle was also applied, resulting in a further 40% reduction to ensure the total penalty to be imposed for the award breaches was just, appropriate and a proportionate response to the conduct the respondents engaged in. Therefore, a total penalty of $56,448 was imposed for the award breaches.

The sum of the penalties imposed for both the records contraventions and award breaches totalled $132,768, to be paid to the claimant under s 83F of the IR Act. The full decision on penalty can be read here.