In yet another case before the courts a company and Director has been fined over $195,000 for underpaying staff and then creating false payslips to try to hide the underpayments when the Fair Work Ombudsman began making enquiries.
In addition to the $170,000 in penalties that were applied against the hospitality business, the Judge issued $25,000 in penalties to the Director personally for breaches that were serious and “reprehensible”.
The business, a Japanese restaurant, was issued a request to provide payroll details to the Fair Work Ombudsman. In an effort to hide the reality of flat rate payments to staff of $15 or $16 per hour, which was well below the minimum entitlement as per the Award, the Director issued a series of payslips and pay records that were falsified and ‘reverse engineered’ to show lower hours worked.
The Director then told employees not to “sell me out” and contacted one employees husband to caution his wife to “not say anything” and that “if things go bad there may not be a shop to work in”.
In assessing the conduct of the Director the Judge noted “Context matters and to characterise the conduct relevant to the contravention in this matter as being ‘serious’ is, frankly, an understatement”.
In addressing the concerted nature of the breaches the Judge noted that this “reverse engineering” was “not a straight forward task” and required “a fair degree of deception” and that “overall, in this context, the conduct is reprehensible”.
Learnings for all businesses
“This business compounded bad with worse and both the business and the Director were penalised as a result. Underpayments are bad. Underpayments that come with a side of falsifying records, lying to the regulator and intimidation of staff is…well the Judge had the right word ‘reprehensible'”, explains ACAPMAs Elisha Radwanowski.
“Mistakes happen. While it is clear, based on the detailed and concerted effort to deceive in this case that this was not a mistake, mistakes do happen. When a business makes a mistake there is only one right response to the discovery of a mistake, whether it is from the Fair Work Ombudsman, the business accountant or advisor, or an external auditor…that is to positively and openly cooperate to immediately correct the error, fix the system so that it doesn’t happen again. That is not what happened in this case”
“What happened in this case was that the business attempted to deceive the regulator by generating and issuing false pay records. This is a breach in and of itself, a serious breach, and given the nature of this breach as actively deceptive, the regulator will (rightly) respond harshly to every such breach identified”, continued Elisha.
“The business dug the hole deeper and compounded bad with worse by creating fake records. It is NEVER ok to create a record that either was not in place at the time or does not reflect the reality in the workplace. Every time such a fake record is created it is a serious breach and will be treated seriously”.
“What all businesses need to remember is that if required documents are missing, then the business must identify that they are missing, implement them from that date and NEVER backdate them”.
“For example, if the business has a process for issuing a Letter of Offer Pack to all staff that includes a copy of the Fair Work Information Statement, and it becomes apparent that 2 staff were never issued with the Pack, the business can not simply issue the Pack to the staff and have them sign and date it as if it was their first day – that would be a fake pay record. What the business should do in this example is issue a Pack that is dated on the date it is actually signed, but that identifies the date of commencement, ideally this Pack would come with a letter providing an apology for the confusion outlining that the business has a process for issuing these Packs to all staff and it appears either the business copy was lost or it was not issued, so it is being issued now to ensure all parties have the information including in the Pack” explains Elisha.
Here to Help
HR Highlights are things to consider, implement and watch out for in your business. They are provided as general advice and you should seek further advice on your situation reaching out to ACAPMA Employment Professionals via employment@acapma.com.au its free for members.
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Elisha Radwanowski BCom(HRM &IR)
ACAPMA
