Getting small things wrong can come with a massive price tag – including jail time. The most common errors are wrong award, wrong classification or wrong penalties. The latest massive underpayment has been $25 million dollars due to all three. This weeks Case Review explores how the Red Cross got it so wrong, and what all businesses should do today to make sure that they don’t become the next front page scandal.
The Australian Red Cross Society identified a series of errors due to an internal (non regulatory) audit.
The full extent of the errors was revealed over time, with the Red Cross initially self reporting to the Fair Work Ombudsman underpayments of 1,160 ‘Lifeblood’ employees. This underpayment was a result of the staff being incorrectly classified as outside the coverage of the Lifeblood Enterprise Agreement. These underpayments amounted to $3.5 million over 11 years.
Following the self reporting of the Lifeblood underpayments the Fair Work Ombudsman conducted its own investigation and identified a further $22 million in underpayments in the Humanitarian Services Division.
The Humanitarian Services Division underpayments identified by the FWO impacted more than 10,000 employees over 9 years and amounted to over $22 million, were primarily due to the wrong award being applied to employees (including incorrectly classifying some staff as award free). The result of applying the wrong employment instrument was that a series of award minimum rates and entitlements were underpaid.
Combined the underpayments amounted to more than $25 million, with individual employees underpaid from $100 to $20,000.
“Under the two Enforceable Undertakings, the Red Cross has committed to stringent measures to comply with the law and protect its workforce. This includes engaging, at its own cos, an expert auditing firm to check its workplace law compliance for then next two to three years” explains Fair Work Ombudsman Sarah Parker.
Learnings for all businesses
“This matter serves as a warning to all employers, particularly those in the not-for-profit sector, that if your don’t prioritise the lawful payment of your staff, you risk underpaying them on a large scale and face significant additional costs of auditing and addressing the non-compliance” continued Ms Parker.
In discussing the case ACAPMAs Elisha Radwanowski notes that “understanding and applying the correct employment instrument is the vital first step to achieving employment compliance. In this case the employer made an incorrect assumption that some staff were award free. This assumption is unfortunately one of the common errors. Almost every employee who is earning less than the current high income threshold ($ 158,500 per annum as at 1/7/2021) is covered by an award. Working out which award is a matter of finding the award that includes the work tasks that most closely matches the work being done. Thankfully in the fuel industry the classifications of employees are very clearly tied to three awards, so there should not be any confusion”.
“Occasionally ACAPMA will be asked about the applicability of the General Retail Award or the Fast Food Award to fuel retail workplaces, given diversification and internal business focus on retail or food over fuel, but the answer is clear – the Vehicle Repair, Service and Retail Award is the one that applies. The General Retail Award actually precludes its use for fuel retail, and the Fast Food Award also notes that it does not cover work that matches another award more closely” continued Elisha.
Fuel Industry Awards
- Fuel Transport workers – including those that drive fuel tankers, those that drive vehicles transporting packaged dangerous goods, and those that work in warehousing dangerous goods are covered by the Road Transport and Distribution Award 2020 (and the Road Transport (Long Distance Operations) Award 2020, when they are doing long distance work)
- Fuel Retail workers – including those providing driveway service, cleaning, shelf stocking, cooking (takeaway and dine in), coffee and console work are covered by the Vehicle Repair, Services and Retail Award 2020
- Fuel Admin workers – such as head office reception, depot staff doing non warehouse work etc are covered by the Clerks – Private Sector Award 2020
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 email@example.com , 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)