In what will be the first time the Fair Work Ombudsman relies on the “serious contraventions provisions” of the Protecting Vulnerable Workers legislation a Melbourne toy retailer who underpaid 8 workers a total of $21,748 is facing in excess of $3 million fines and its director is further facing up to another $1 million in fines for the same underpayments.  The business may also be subject to up to $189,000 in fines for providing misleading payslips, with the director facing a further $37,800 in fines relating to the payslips.

This prosecution will be the first under the “serious contravention provisions” that allow for penalties that are 10 times higher than the previous maximum penalties, with companies facing fines of up to $630,000 per breach and individuals facing fines of up to $126,000 per breach.  In discussing the prosecution, Sandra Parker of the Fair Work Ombudsman has highlighted that the higher penalties are justified in this case as the business had failed to correct the underpayments despite engagement with the Ombudsman.

In addition to the serious contraventions, the underpayment of 8 international temporary visa workers over a period of 9 weeks, where staff were underpaid between $395 and $5,041, the business and director are also facing penalties for payslip breaches where the ABN did not match the actual employer.  The payslip contraventions carry penalties of $63,000 for the business and $12,600 for the individuals per breach.

The case will go before the Federal Circuit Court on 2 August 2019 in Melbourne.

What should all businesses learn from this case?

All businesses have been on notice for some time now that it is imperative to understand and comply with the requirements of employment compliance.  This means getting the basis right; understanding the employment instrument (in most cases the Award), applying it correctly and documenting the employment relationship.

What this case highlights very clearly is that this has some very practical requirements and that failure to take the time to get it right will result in devastating fines to the business and directors.

Practical Learnings?

When an underpayment or non compliance is identified, either by the business or by the regulator, it is imperative that the issue is corrected promptly and in full.  In this case the business was made aware of the underpayment and did not rectify it and is now facing penalties that are almost 148 times higher than the underpayment itself, and the director is personally facing more than $1 million in fines.  Had the business rectified the underpayment promptly and fully and implemented systems to ensure that the breach was not repeated it is clear that the Ombudsman would not be pursuing the maximum “serious contravention” penalties.

Time and attendance records are critical.  In this case the Ombudsman is utilising the reverse onus of proof to address the underpayments.  In the past it was encumbent on the Ombudsman and the employee to prove that they had worked at specific times and that they had not been paid (or had been underpaid) for those times.  With the changes that came into the legislation in 2017 the onus now sites with the business to prove that the employee was not working at those times.  So the business must produce, and retain, detailed time and attendance records to ensure that it can clearly and completely address any claim of non/underpayment.  From a practical standpoint this means keeping rosters, timesheets and/or clock in clock out data, for the full 7 years after they are no longer relevant.

Payslips are legal documents, not just a courtesy, and they must be issued with the correct and detailed information that is required.  For example, under the Vehicle Manufacturing, Repair, Service and Retail Award 2010, unless otherwise agreed, payment must be made on the Thursday of a pay cycle and notification in writing in the form of a payslip must be provided the day prior.

Payslips also must record accurate business information (name and ABN), Date of payment, Start and finish dates of the pay period, Gross amount payable, tax deducted as well as the net amount.  Payslips also must identify superannuation contributions and funds as well as any other deductions being made.  For employees that are paid by the hour there is a requirement to show the hours worked and the rate applied to those hours, this has implications when there are shift loading or other penalties that apply to specific hours/days – the effect of which is, unless there is an agreement otherwise – each type of work must be displayed separately on the payslip.  Allowances are similarly required to be displayed separately unless otherwise agreed.

Takeaway?

  • Failure to engage with, and follow the direction of the regulators will result in the maximum penalties being pursued in the event of breaches. 
  • When it comes to claims of non/underpayment, the responsibility will sit with the business to prove that the payment given was appropriate to the hours worked – so time and attendance records are critical.
  • The format, content and provision of payslips is regulated by the law and the Awards, failure to meet these strict provisions can result in hefty penalties.

A little help?

ACAPMA Members are reminded that they can access advice, support and assistance in the area of employment compliance by contacting the ACAPMA employment department via; employment@acapma.com.au .