The Commonwealth Bank is facing over $660K in penalties due to $16.44 million in underpayment to 7,425 staff engaged under Individual Flexibility Agreements despite self reporting to the Fair Work Ombudsman.
In 2019 the CBA self reported to the Fair Work Ombudsman underpayments of staff going back over 9 years. In is declaration the CBA committed to identifying the effected staff and repaying all underpayments plus interest. In 2020 the CBA repaid over 55,000 current and ex staff over $56.5 million in backpay plus interest.
Despite this self reporting and backpay the Fair Work Ombudsman has initiated a case in the Federal Court pursuing the maximum penalties, along with backpay for 7,425 specific staff who were engaged under Individual Flexibility Agreements that the Ombudsman notes were not just inadequate, but were in fact “invalid” due to the staff not being provided with the minimum requirements of being better off overall. The Ombudsman notes that the CBA “failed to undertake reconciliations to ensure employees were not paid less overall compared to the applicable industrial instruments, and make top-up payments for any shortfall” which the Ombudsman contends amounts to “systematic” failures and “knowingly” underpaying staff.
Learnings for all businesses
All businesses must understand the fundamental of Individual Flexibility Agreements prior to implementing them, and ensure that a rigorous system for reviewing and testing the modelling of the Agreement against the Award…which is used.
What is an IFA?
An individual Flexibility Agreement (IFA) is an agreement between the employer and the individual employee to modify some eligible clauses of the applicable Award.
The typical use of an IFA in fuel transport is to create a “racked” or “common hourly” rate that provides for all allowances and penalties that would ordinarily have to be shown on the payslip separately and individually, but with the use of an appropriate and compliant IFA can be shown as a single rate (or a series of rates) that provides for all of those elements and makes payroll simpler to implement.
When is an IFA appropriate?
An IFA is appropriate when there is a stable, known roster for the employee, at least for the core ordinary hours. This is a requirement because the IFA must be tested against the Award to ensure that the employee is better off overall
Elements of a compliant IFA
In order for the IFA to be compliant it must;
− Provide for the employee to be better off overall with the IFA compared to the Award unmodified
− Be written down
− Be signed by both parties
− Clearly identify the applicable Award
− Clearly identify the clauses of the Award that are to be modified, and how they are to be modified
− Clearly identify that the IFA can be terminated by either party with 90 days written notice
− Be reviewed regularly to ensure that the IFA continues to provide a Better Off Overall situation for the employee
Without these elements an IFA will not be deemed to be legitimate or appropriate and the business may face penalties for the subsequent failure to meet the requirements of the Award (such as for failure to show allowances separately, or even an underpayment claim for not paying the allowances).
For more information on Individual Flexibility Agreements ACAPMA Members can see the ACAPMA Employment Guide on IFAs.
Here to Help
HR Highlights are things to consider, implement and watch out for in your business. They are provided as general information for you to consider and do not constitute advice. You should seek further advice on your situation by contacting your legal advisor. ACAPMA members can access resources and receive advice, guidance and support from the ACAPMA employment professionals via firstname.lastname@example.org, it is free for members. ACAPMA Membership delivers this and more benefits, see; https://acapma.com.au/membership/ for more information.
Elisha Radwanowski BCom(HRM&IR)