The Fair Work Ombudsman has won its first prosecution against a former Caltex franchisee who has been ordered to pay close to $100,000 in penalties for falsifying the pay records of workers.

The penalties are the highest the Fair Work Ombudsman has secured in a legal action relating solely to record-keeping and pay slip breaches.

Federal Circuit Court Justice Alexander “Sandy” Street issued a penalty of $16,038 against Peter Dagher and $80,190 against his company Aulion Pty Ltd, which formerly operated the Caltex service station at Five Dock in Sydney’s inner west.

The Fair Work Ombudsman investigated the outlet as part of a national audit of 15 Caltex service stations conducted in response to concerns about underpayments and other non-compliance issues within the Caltex franchisee network.

Six employees at the Five Dock outlet were migrant workers and all but one was an international student.

The Fair Work Ombudsman alleged it found inconsistencies in pay records provided by the service station, and the company failed to issue employees with accurate pay slips within one pay day.

It also alleged it was prevented from completing a full audit to determine whether employees at Caltex Five Dock had been paid their full lawful entitlements.

Fair Work Ombudsman Natalie James said courts were demonstrating they are prepared to issue near maximum penalties for serious record-keeping contraventions. She said fines for serious record-keeping breaches of the Fair Work Act would be even higher in the future following the introduction of the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017, which came into effect in September.

“The breaches by this Caltex franchisee occurred in 2016 – but if this same conduct occurred today, the possible sanctions available in Court would be even more significant,” Ms James said.

“Financial penalties for failing to keep records and issue pay slips have significantly increased and any unscrupulous employer that frustrates a Fair Work Ombudsman time-and-wages investigation by using false records can now face prosecution in criminal court.

“A reverse onus of proof can also now apply, meaning that employers who don’t meet record-keeping or pay slip obligations and can’t give a reasonable excuse will need to disprove allegations of underpayments made in a court.”

The absence of accurate time-and-wages records prevented the Fair Work Ombudsman from completing a full audit to determine whether allegations that workers at the Caltex Five Dock service station were being paid as little as $12 an hour were correct.

A Fairfax investigation in 2016 revealed allegations of widespread underpayment of workers within the Caltex network.

The Fair Work Ombudsman issued a report in March this year detailing compliance problems among Caltex’s network of franchisee-operated outlets, including serious record-keeping deficiencies that prevented an assessment of the true extent of underpayments.

Ms James on Wednesday repeated her agency’s call for Caltex to take steps to ensure the
Australian community can be confident Caltex is operating openly and with full
accountability.

“It is incumbent on Caltex to take steps to clean up its business, taking into account the
shocking levels of non-compliance identified in FWO’s report, including underpayments
and serious record-keeping deficiencies, and the profile of the workers and businesses in
its network,” Ms James said.

A spokeswoman for Caltex said the operator who was the subject of the legal action left the Caltex network in 2017.

“Caltex has been and continues to work with the Fair Work Ombudsman (FWO) who investigated some Caltex-franchised sites,” the spokeswoman said.

“We have taken the actions we are permitted by the relevant Codes and under our agreements with franchisees. In mid 2016 we established an audit process which is more than halfway through and continues with the purpose of uncovering wage underpayment in the Caltex franchisee network.”