In September 2017 the ‘Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017’ passed the Federal Parliament.
Its provisions are a raft of changes that include increasing the maximum penalties for employers who deliberately flaunt their obligations under the Fair Work Act; indeed, penalties for serious contraventions have been increased tenfold. Where an employer knowingly measures their obligations as part of a systematic pattern of behavior the maximum penalties will be $630,000 and $126,000 per contravention, applying to corporations and individuals’ respectively.
Concurrently, the maximum penalties for record keeping and payslip breaches of $63,000 for corporations and $12,600 per contravention for individuals will now apply.
Whereas existing penalties in cases where employers give false or misleading payslips to workers or provide officers of the Fair Work Ombudsman (FWO) with false or misleading records have tripled.
Under the new laws employers who do not meet record keeping or payslip obligations and cannot provide a reasonable excuse, will need to disprove wage claims in Court, (effectively reversing the onus of proof).
The FWO, Natalie Jones, has gone on record as saying, “The clear message to employers is that if you short-change employees and then thumb your nose at Fair Work Inspectors, you do so at your own peril.”
“Businesses found breaching record keeping laws run the risk of receiving even higher penalties in the future.”
She went on to say that in passing the new legislation that, “Parliament has acknowledged the seriousness of falsifying records……………it is clear that lawful minimum rates apply to all employees in Australia and they are not negotiable………..”
A MAJOR CONCERN IN SECTORS EMPLOYING PREDOMINATELY CASUALS:
The FWO has been most active in the ‘convenience store’, ‘hospitality’ and ‘contract cleaning’ sectors over the past three years. The period July ’15 through to June ’16 saw 1066 compliance activities in the hospitality sector, (essentially ‘spot checks’ on businesses), with 58% found to be in contravention of the FW Act.
Many employers choose to adopt a cooperative approach to matters drawn to their attention by the FWO. Unfortunately some are unwise enough to attempt to frustrate processes aimed at giving workers their legitimate entitlements. Some employers instead, choose to rely upon the circumstances that these particular sectors have a high reliance on casual labour, and draw significantly upon foreign students or 457 visa holders,( which give rise to an unstable labour market), to staff their operations.
RECENT CASE OUTCOMES:
Recent decisions within the federal jurisdiction point to an trend which sees larger payouts of monies owed by way of wages and other entitlements, and increasingly higher penalties imposed on employers.
In FWO V Pulis Plumbing Pty Ltd & Anor (2017) an apprentice claimed 201 hours of overtime, worked over a 3 month period, amounting to $27,000 in wages. The employer failed to keep adequate records, and made only modest attempts to address the dispute.
In handing down the decision in the matter, the Judge observed:
“Given the statutory requirements upon employers with respect to record-keeping, it appears to me that, ordinarily a Court would accept even the most slight and generalized evidence of an employee as to the hours of employment in circumstances where an employer does not produce appropriate records…..in future if the employer fails to keep time sheets and provide payslips the employer has the burden of disproving an employee’s claim about hours worked and payments made.”
The outcome of the case saw the underpayment of nearly $27,000 made good to the former employee, and a penalty of $20,000 imposed on the employer for breaches of payslip and record-keeping obligations.
In a matter relating to the underpayment of wages to two overseas workers, the employer Green Clean (Aust) Pty Ltd, refused to cooperate with the FWO. Ultimately the Federal Circuit Court imposed multiple orders including:
- $3,000 to the workers, for wages owed;
- $1,890 as a fine against the Director of the company;
- $9,450 as a fine against the company, for failing to adhere to a Compliance Notice, issued by the FWO.
Again, in the Federal Circuit Court, Judge Solvatore Vasta, found that during a four month period in 2015, operators of two Gold Coast restaurants, Somurais Paradise and the Japanese Curry House Kawaii had underpaid staff by $59,080.
Describing the company’s record-keeping violations as “very serious” and “a most heinous offense”, the Judge imposed the maximum fine on the company and, concurrently, fined the owner $38,000.
The FWO proved that on two occasions the company had attempted to provide false records in order to reduce its economic exposure. In the final analysis, almost $300,000 worth of fines, aside from the back payment of wages, were imposed by the Court.
In another, underpayment case, involving overseas workers; operators of an Inner Sydney Malaysian Restaurant, the Marak Malaysian Restaurant (operated by Marak Pty Ltd.), the FWO identified six workers (five of whom were visa-holders from non-English speaking background, as being in receipt of ‘flat hourly rates’ of as low as $11.00 per work, during the period February 2012 to April 2015. Collectively the underpayments totaled $87,000.
Federal Circuit Court Judge, Justin Smith imposed fines on the three Company Directors, totaling $116,000, and a further fine against the Company of $184,960.
Additionally, Justice Smith ordered the company to commission a qualified professional to audit pay procedures across all of its restaurants and to rectify any underpayments identified.
Finally, to demonstrate the wide-ranging scope of the new laws, a Victorian accounting firm EZY Accounting 123 Pty Ltd was penalized $53,880 by the Federal Circuit Court in November, after doing work for Blue Impression Pty Ltd (the operator of a fast food outlet), which had been found to have underpaid twelve employees in a 2014 audit, by the FWO.
Judge John O’Sullivan found that the accounting firm had been “knowingly involved in conduct that constitutes illegality.”
“Ezy was involved in a relationship with Blue Impression where it provided payroll services. As such it must put compliance with the law ahead of business interests.”
Under Section 550 of the FWA, any person who helps a group contravene civil remedy provisions can be penalized as if they had done it themselves – even if they are merely aware of it as a systematic pattern of behavior.
The offence here is being found to have had accessorial liability, which brings with it a maximum fine of $126,000.
The FWO is now armed with stronger/more stringent enforcement powers under the new legislation. They have proven that once alerted to systemic breaches of the FWA, particularly those involving vulnerable workers, usually casuals, with English as second language backgrounds, they will prosecute both the companies involved, as well as their Owners/Directors.
Organizations providing professional services to organizations (particularly payroll support), are also open to prosecution and sanctions for ‘accessorize liability’.
Keeping accurate and up-to-date time and wage records, ultimately is the best defense against prosecution.
However, in the event that the FWO ‘comes a calling’, co-operation and openness is the best approach; never try to avoid admitting to errors, particularly those made in good faith.