Broke No Money

By Emma Treherne and Lindsay Carroll, NRA Legal

An employer who deliberately withheld parental leave payments to an employee has been ordered to pay a whopping $98,700.00 in penalties.

Judge Nicholls of the Federal Circuit Court of Australia held that both the employer and company director of the employer broke the law by, amongst other contraventions, creating and using false and misleading records and failing to pass on government-funded paid parental leave entitlements to an employee.

Background

The employee worked as a chef for the employer and had approximately 17 months of service when she stopped work due to her pregnancy in mid-June 2015.

The Government had approved the employee’s claim to government-funded paid parental leave. The delay in payment to the employee of these parental leave entitlements was so great that the employee did not receive a single payment within the period she was eligible to receive the payments.  This was because the company director failed to register the employee with the relevant government department.

On 30 April 2015, the government was finally able to transfer into the employer’s bank account the full $11,538.90 of parental leave pay that the employer could then pay to the employee.

However, the employer did not transfer any of the government-funded parental leave payments to the employee. The Government department made attempts to identify why the payments were not paid to the employee.  With no success, the government department referred the matter to the Fair Work Ombudsman (FWO).

After a protracted investigation, the employer and the company director admitted to contravening a number of workplace laws.  Specifically, the employer and company director admitted to:

  1. failing to pay Commonwealth-funded parental leave to the sum of $11,538.90;
  2. failing to maintain records relating to the employee’s employment;
  3. failing to provide payslips within one day of payment;
  4. creating a false and misleading pay record; and
  5. making use of false and misleading record by providing it to the employee’ amongst other contraventions.

Having admitted to contravening the laws, the employer and company director then pleaded with the Court to have the penalties imposed on them reduced for several reasons.

Specifically, at the time the laws were contravened, the company director argued that he was experiencing a period “of great personal turmoil” due to marital breakdown and that this lead to a failure to keep proper business records.  This was despite his marriage dissolving two years prior to the contraventions.

Further, because the business of the employer – a service station and roadhouse – was no longer in operation, its capacity to pay penalties imposed by the Court diminished and if faced with liability for such payments, it could lead to bankruptcy proceedings.  Furthermore, the company director alleged he was unemployed and living off his savings and could not afford to pay any penalties imposed by the Court.

Decision

The Court held that the company director and employer created a false record of the payment of the employee’s parental leave payment and that this was a deliberate act.  The company director falsely advised the government department it made the government–funded parental leave payments in May 2015 andthat the employee had signed the alleged payment authority.

Judge Nicholls gave a scathing judgment.  He was unconvinced by many of the arguments raised on behalf of the employer and company director.

The judge held that there was no evidence the stress from the marital breakdown directly affected the company director’s capacity to comply with his lawful obligations and specifically that “he lacked the capacity to distinguish between the truth and a deliberate lie”.

Judge Nicholls found that although the employer’s capacity to pay a penalty was diminished due to it no longer being in operation, the company director’s actions in seeking to  conceal the contraventions was significant and greater in weight to his claimed inability to pay a significantly penalty.

Furthermore, Jude Nicholls held the company director failed to express genuine remorse for his actions and that he did not cooperate with the authorities such as the government department administering government-funded paid parental leave and the Fair Work Ombudsman in its investigation into the conduct of him and the employer.

The Court held that the company director and employer pay to the Commonwealth respectively $19.740 and $98.700 in penalties for their failure to pay instalments of parental leave to the employee, failure to maintain records of employment and pay slips, and for creating and making use of false and misleading records such as pay records.

Further information

Underpayment of wages and other lawful entitlements is a serious issue and can become much more serious for employers who do not comply with notices or orders from regulators; for more information, please call NRA on 1800 RETAIL (738 245) and ask to speak to one of our workplace advisors.


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