Retailers and restaurants targeted for underpayments and false records with massive fines
Written by Sid Sidhu and Justine Ansell, NRA Legal
The crackdown on retailers, fast food stores and restaurants avoiding their obligations has well and truly begun. As predicted, the Fair Work Ombudsman (FWO) has increased its auditing activity and successfully obtained significant fines against two hair and beauty retailers in Melbourne, as well as two restaurants on the Gold Coast, for underpayments to their employees and exploiting vulnerable workers. The fines handed down total over $350,000 and take full advantage of the changes introduced by the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017.
What are my legal obligations and what penalties do I risk facing?
Employers operating under any Modern Award must ensure that their employees are receiving their minimum entitlements for all hours worked. This includes the minimum rate of pay for their classification, weekend penalties, late night penalties, overtime rates, casual loadings, annual leave loadings and any applicable allowances.
Simply paying employees an hourly rate that is above their minimum rate of pay will not excuse employers from liability or be sufficient protection to avoid claims, prosecutions and fines. Employers with such arrangements will need to ensure, on a regular basis, that their employees’ weekly wage compensates them for all hours worked in comparison to the Modern Award and that a sufficient, written agreement is in place to that effect.
Remember that the new laws also apply to record-keeping obligations.
All members should be aware of these changes and be proactive in addressing any non-compliance issues immediately. NRA has developed some helpful checklists outlining what employee records your business must be keeping to ensure compliance with the Fair Work Act 2009 (Cth) (FWA). Members can log onto our Portal for more information.
There is also a reverse onus of proof that has been introduced that employers must keep in mind. This will allow the Courts to presume that an employer has breached the FWA where they fail to provide sufficient records that disprove allegations of underpayment.
This means that if an employee makes a claim against their employer alleging that they were underpaid, and the employer is unable to provide records to dispute the claim, then the Courts are entitled to accept that employee has in fact been underpaid. In this scenario, the Court is likely to issue an order for compensation to the employee, as well as hand down massive fines to be paid by the employer and potentially individuals, including Directors and key decision makers, such as Human Resources and payroll personnel in the employer’s business.
Employers are also at risk of significant penalties where they knowingly make, keep, or provide false or misleading pay slips. The maximum penalties in this regard have now doubled to $12,600 against individuals – such as the director or payroll officer – and $63,000 against the corporation, per breach.
Significantly higher penalties of up to $126,000 against individuals and $630,000 against corporations per breach will now apply in cases of ‘serious contraventions’ of the FWA. A serious contravention arises when an employer has engaged in a systematic pattern of conduct, so there is great risk in now reviewing your payroll and employment records practices and ensuring compliance.
Record $300,000 fines imposed for underpayments and false records
A hardline approach was recently taken by the Fair Work Omudsman (FWO) and the Courts, when the operators of two restaurants on the Gold Coast were fined almost $300,000 for failing to pay the relevant minimum wage for cooks under the Restaurant Industry Award 2010 as well as superannuation, weekend and public holiday penalties and loadings for casual work.
On two occasions, the operators attempted to provide false and misleading pay slips, which fabricated the employees’ rates of pay and the number of hours worked.
Despite the fact the employees had been backpaid by the time the matter when to court, it was still found that the offences committed were serious, deliberate and heinous, warranting severe punishment and deterrence.
The owner of the business was also personally fined $38,000.
Record fines imposed against individuals
In another recent case brought by the FWO against two hair product retailers in Melbourne, young overseas workers were found to have been underpaid a total of $34,915, resulting in individual penalties being imposed against the husband-and-wife operators of $30,600 and $40,000 respectively.
Despite the retailer falling into administration last year, the FWO managed to secure penalties and back-pay orders against the duo for deliberately contravening the law and threatening a worker with notifying the Department of Immigration and Border Protection of a breach of their visa conditions.
According to Judge Hartnett, the statement made by the employer “exhibits a concerning awareness of the employee’s vulnerability and a willingness to exploit such vulnerability to the [employer’s] benefit.”
How can I avoid penalties?
There is no way around it. Employers must demonstrate that they are compliant with the FWA and Modern Awards by producing accurate records and pay slips which are legible and complete.
At NRA, we are supporting our members in this space with a suite of templates at no charge that you can access at any time via our Member Resources Portal, including:
- time sheets,
- leave application forms, and
- much more.
These templates can be used to help maintain accurate records in your business and reduce the risks of your business being non-compliant and avoiding massive fines.
Additionally, NRA can work with your business to conduct audits of your business records and produce a detailed report which will identify any non-compliance issues. These reports are extremely useful in demonstrating to the FWO that you have taken sufficient steps to identify and address any issues within the business.
Further, in light of the recent changes to the FWA regarding vulnerable workers, we have a wide range of solutions, training and services tailored to our members regarding what you need to be doing to best protect your business and manage the risks.
We remind members to be vigilant in this space and start taking immediate steps to check your records and compliance. If you need any further information or advice or would like to discuss our range of solutions in this space, contact the NRA today on 1800 RETAIL (738 245) to speak with an advisor.