As an employer, you would be aware of your legal and fiscal obligations when employing workers – specifically, the obligation of ensuring correct payment of wages and entitlements in accordance with the Fair Work Act 2009 (Cth) (FW Act). By Stephanie Shahine and Simone Caylock of AMTIL corporate partner Rigby Cooke.
The Fair Work Ombudsman (FWO) is tasked with enforcing compliance with the FW Act, including ensuring employees receive their lawful entitlements. The FWO can investigate employers if a complaint has been made regarding a failure to comply with workplace laws, including wage underpayments. If a breach has been identified, the FWO has a range of compliance powers, including issuing a compliance notice requiring that the breach is rectified within a certain period of time, entering into an Enforceable Undertaking and/or issuing prosecution proceedings against the employer and persons knowingly involved in the alleged breach, including directors.
Sapphire Freighters: a case study
The consequences of not paying the correct wages to employees and failing to rectify the issue were demonstrated recently in a Federal Circuit Court case against Sapphire Freighters Pty Ltd, a long-haul trucking business based in Melbourne. The FWO successfully secured a financial penalty of $21,500 against Sapphire Freighters for failing to comply with a compliance notice requiring back-payments of entitlements to a former truck driver, as well as orders that Sapphire Freighters calculate and backpay approximately $6,000 in outstanding entitlements owed to the driver, plus superannuation.
In July 2018, the FWO received a request for assistance from a truck driver who had worked at Sapphire Freighters between December 2016 and January 2018. Following an investigation, the Fair Work Inspector formed a belief that throughout the driver’s employment, the company had failed to pay him a rate of pay that was in accordance with the Road Transport (Long Distance Operations) Award 2010, which included certain allowances.
As a result, the FWO issued the company with a compliance notice in December 2019. The compliance notice also alleged that Sapphire Freighters breached the FW Act by failing to pay out accrued annual leave on the driver’s termination.
Sapphire Freighters failed to co-operate with the FWO and ignored the compliance notice. In situations where an employer fails to comply with a compliance notice issued by a Fair Work Inspector, the FWO can commence proceedings seeking remedies and penalties for any contravention of an entitlement provision, as well as penalties for failing to comply with a compliance notice.
When the matter came before the Court, Justice Mercuri found that there was no evidence of any contrition, corrective action or co-operation with the authorities by Sapphire Freighters, who did not appear at the penalty hearing.
Justice Mercuri said: “There is also a strong need for general deterrence, particularly in the road freight transport industry, which has significant rates of non-compliance with workplace laws.”
The evidence given by the FWO during the proceeding highlighted that the road freight industry currently generates the second-highest number of disputes dealt with by the FWO, identifying road freight operators in Victoria as the worst offenders.
The Fair Work Ombudsman, Sandra Parker, said: “When compliance notices are not followed, we are prepared to take legal action to ensure hard-working employees receive their lawful entitlements.”
This case demonstrates that if an underpayment has been identified, the risk of being prosecuted is high if the employer does not co-operate with the FWO and comply with any compliance notice which has been issued.
Other recent developments – Award Increases and Wage Theft Laws
For all employers, it is important to note that on 16 June 2021, the Fair Work Commission handed down its 2021 Annual Wage Review Decision, increasing full-time minimum wage rates in modern awards by 2.5%. The effective date for the increases varies between awards.
In addition to this update, if you are in Victoria, wage theft became a crime from 1 July 2021 under the Wage Theft Bill 2020. Therefore, any employer in Victoria who dishonestly or recklessly underpays employees, withholds employee entitlements, or falsifies or fails to keep employment records to obtain a financial advantage faces a fine of up to $218,088 or up to 10 years in jail for individuals, and a fine of up to $1,090,440 for companies.
What does this mean?
Businesses should conduct regular reviews of modern awards and agreements to ensure continued compliance.
Should it be brought to your attention that you may not have met your legal obligations, we recommend that you seek immediate advice regarding corrective action you should take, including to minimise your exposure to penalties and other consequences.
All employers need to properly understand their legal obligations to avoid any possible claims by employees, the imposition of civil penalties or prosecution. An audit of compliance can not only identify problems but also reduce the risk of being prosecuted if errors recklessly go uncorrected.
Rigby Cooke Lawyers has extensive experience working with clients to ensure their employment contracts are up to date and employee wages are paid in accordance with the Fair Work Act 2009 (Cth).
Stephanie Shahine is an Associate in Rigby Cooke’s Workplace Relations team. Simone Caylock is a Partner in the Workplace Relations team.