Pay and Conditions



Fair Work Ombudsman Warning to Employers

The Australian Government has consistently signalled that it intends to ensure companies who do not pay their employees properly or who have breached the workplace laws will face significant penalties. Given the numerous high profile cases in which employee have been underpaid by their employer including companies such as 7Eleven, and Dominos, this has become an important issue for both the Australian Government and the Fair Work Ombudsman. The Fair Work Ombudsman, Natalie James, recently warned businesses “to get your house in order” ahead of the Turnbull government’s new laws to increase penalties for contraventions in relation to workplace laws.

Ms James recognised that most employers wanted to do the right thing but advised that the mere intention of doing the right thing was not enough. She stated “smployers need to take tangible action on an ongoing basis to ensure they are paying the right rates and keeping appropriate records to demonstrate this.”

In particular, Ms James discussed the introduction of the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (“the Bill”). The Bill if it becomes law aims to enhance the penalty framework for breaches of workplace laws. The Bill introduces new penalties, 10 times the current levels, for serious contraventions where the conduct was deliberate and part of a systematic pattern of behaviour. Additionally, the Bill seeks to increase penalties for record keeping failures; make franchisors and holding companies responsible for underpayments by their franchisees or subsidiaries in circumstances where they knew or ought reasonably to have known of the contravention; prohibit employers from unreasonably requiring employees to make payments (e.g. demanding a proportion of employee wages to be repaid in cash) and strengthen the evidence gathering powers of the Fair Work Ombudsman to conduct investigations.

The matter of underpayments and the failure to provide modern award entitlements has been canvassed in our previous alerts. However, the issue of record keeping is just as important. Unfortunately, many businesses fail to keep proper records in accordance with legislative requirements. This is an area to which the Fair Work Ombudsman appears to be paying particular attention with almost half of the matters commenced in the last financial year involving allegations of record keeping failings and almost a third of all matters including allegations of false or misleading records. Ms James specifically referred to the 2014-2015 Records and Resources Campaign which was aimed at checking whether businesses were doing the right thing and ensuring employers were aware of their workplace responsibilities. The campaign also found that 84% of errors identified was in relation to pay slips or record keeping. As part of this campaign, $620,000 was recovered for 336 employees. Unfortunately for one business in particular, despite the fact that it was found it had misunderstood the relevant modern award and applied the wrong rate of pay over several years, resulting in a significant underpayment claim, the employer was required to pay back over $500,000 to employees. It was also required to implement a new payroll system.

The Fair Work Ombudsman has stated she is currently continuing with an ongoing National Compliance Monitoring Campaign and will be checking employers have met their workplace obligations in relation to minimum wages, penalty rates/allowances, overtime rates and payslips and record keeping. It can be quite easy for employers to misunderstand or mistakenly apply the incorrect wage rate, legislation or modern award resulting in significant consequences for the business. However, the Fair Work Ombudsman’s current stance clearly demonstrates that ignorance or even an innocent mistake will not be a defence and that businesses must ensure their records and systems are updated and in order.

Ms James also discussed the Fair Work Ombudsman application of the accessorial liability provisions under s550 of the Fair Work Act 2009 (Cth). The accessorial liability provision has been used for some time now and allows liability to be extended to others in the business who are involved in a contravention. The accessorial liability provisions may extend to company directors or other advisers such as human resources personnel, accountants or other entities benefiting from the labour. Astonishingly, 92% of all matters filed by the Fair Work Ombudsman involved accessories in 2015-16. The FWO have been able to obtain a variety of orders including orders for accessories to pay penalties personally, freeze assets and to restrain future contraventions.

What Employers Need to Understand

The record keeping requirements are contained in the Fair Work Act 2009 (Cth) (“FWA”) and the Fair Work Regulations 2009 (Cth) (“Regulation”). In particular, under the FWA an employer is required to make and keep employee records for seven years. The FWA also stipulates that an employer must provide a payslip to an employee within one working day of paying the employee in respect of their work. Both these are mandatory requirements and incur civil penalties.

The Regulation requires employers to keep records in legible English and each employee record must include the employee and employer’s name, whether the employee is full-time, part-time or casual, date employment commenced and terminated (if applicable) and the ABN of the employer. Employers must also maintain an employee record to include rate of remuneration, any deduction of wages, hours worked by each employee, details of any bonus, penalty rate, loadings or monetary allowance entitled to the employee, overtime hours, overtime pay, superannuation contributions (including name of fund, amounts, period over which the contributions were made) and if the employee is entitled to leave, any leave the employee takes and the balance of the leave entitlement. Additionally, if the employer and employee agree to an individual arrangement in respect of averaging hours, or entering into a guarantee of annual earnings, or the cashing out of accrued annual leave, employers must make and keep a copy of the written agreement as part of the employee personnel file.

In relation to payslips, the Regulation requires certain information to be provided in an employee’s payslip. These include the name of the employer, the employee’s name, the period to which the pay slip relates, the date on which the payment was made, the gross amount of payment, the net amount of payment, any amount to be paid as a bonus, loading, allowance, penalty rate, incentive based payment or other entitlement, the employer’s ABN number, the superannuation contribution and if the employee is paid an hourly rate, this should also be disclosed on the payslip as well as the number of hours worked. The Regulation enforces the above requirements by way of civil penalties.

Recent Fair Work Ombudsman Raids

The Fair Work Ombudsman has raided 80 businesses this week alone in Wollongong, NSW in response to complaints of underpaid young workers. These raids are said to be in the wake of increasing awareness of the widespread underpayment and in some cases, non-payment of university students by cafes, restaurants, retail and take-away food outlets.

The Fair Work Inspectors specifically interviewed business operators and workers and checked records to ensure workers were being paid minimum hourly pay rates, penalty rates overtime and allowances as well as their compliance with record keeping and pay slips requirements.

Lessons for Employers

In light of the above and with further changes to the legislation looming, it is critical businesses have implemented and are consistently following correct processes and practices for their business. Employers should consider and review the following within their business:

  • Ensure your business record keeping practices are up to date and in order;
  • Ensure you are providing appropriate payslips to employees (these should include the record of superannuation and leave accruals);
  • Review whether you are applying the correct modern award or relevant legislative instrument to your employees;
  • If you are a franchisor or holding company, ensure your franchisee or subsidiaries are compliant with their workplace obligations;
  • Ensure correct wages, penalty rates and allowances are being paid to employees (including minimum engagement payments);
  • Ensure you are paying correct superannuation, tax and employee entitlements; and
  • Provide proper and adequate employment contracts to your employees.

If you wish to discuss any aspect of this article or require specialist advice or assistance in relation to an employment law matter, please do not hesitate to contact us.

This alert is not intended to constitute, and should not be treated as, legal advice.

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