‘Loophole closed’: Business will have to prove it didn’t underpay workers in unprecedented case

A law requiring businesses which don’t keep proper wage records to disprove underpayment allegations will be tested in the Federal Circuit Court for the first time.

More than a year after reverse onus of proof laws came into effect, the Fair Work Ombudsman (FWO) will use them in a case against Queensland-based Sushi operator, which is alleged to have underpaid nine workers $19,467.

The first of its kind case could have wide-reaching implications for businesses, particularly if the FWO is buoyed by a successful prosecution.

The business in question is A&K Property Services, which the FWO claims did not keep proper records and failed to issue pay slips.

Workers were allegedly underpaid minimum ordinary hourly rates, as well as penalty and overtime rates. It is also alleged superannuation and leave entitlements were not provided.

The FWO said the “majority” of the underpayments have been rectified, but it is still seeking an order for back-payment of allegedly unpaid superannuation.

The business faces penalties of up to $63,000 per contravention, while one of the directors could be fined more than $25,000.

Acting Fair Work Ombudsman Kristen Hannah said the new laws closed a loophole in the Fair Work Act.

“In the past some employers had avoided facing litigation by FWO because they had breached their record-keeping obligations, and we could not present sufficient evidence in Court to prove underpayments,” Hannah said in a statement.

“Employers should be on notice that this loophole is now closed and the Fair Work Ombudsman will make full use of the new laws to protect vulnerable workers.”

Business to bear the brunt

If the FWO is successful in the case it is likely to significantly lower barriers to future prosecution, Workplace Law managing director Athena Koelmeyer says.

Reversing the onus of proof on businesses which haven’t kept records lowers prosecution costs for the FWO, which in turn could enable it to take cases to Court it otherwise would be unable to.

Reverse onus of proof laws already exist in workplace discrimination and adverse action cases, but those applications differ because they often hinge on subjective intent, rather than payment records which are objective.

Koelmeyer explains the reverse onus law is like a “double whammy” for business owners because the court often has a predisposition towards believing the worker and black letter courts expect evidence to be submitted in a proper form.

“I don’t think SMEs should be surprised if they submit an affidavit saying everyone worked those hours but then the worker says ‘no no, this is what happened’ … and the court then believes the worker,” Koelmeyer tells SmartCompany.

“Every judge is a little bit different, but by the time you get to this kind of proceeding the FWO is bringing you are in a pretty black letter law court.

“Bearing the onus of proof means you are expected to be able to put your records and evidence into a form the courts will accept,” Koelmeyer explains.

Businesses will be required to meet a burden of proof called the balance of probabilities, which essentially means being able to convince the court that a case is more likely to be right than otherwise.

Having some wage records alongside an affidavit may help a case, but Koelmeyer says being prepared, persuasive and having a good lawyer would be the best defence.

A 2012 High Court Case, Barclay v. Bendigo Tafe, could provide an insight into how the Court handles reverse onus of proof, Koelmeyer says.

“If you get into the witness box and give evidence that is persuasive, that there was no prohibited reasoning in your decision making … then the court will accept that,” she explains.

The nine workers in this case were all South Korean nationals, aged in their 20s and 30s, who were visiting Australia on working holidays and student or vocational education visas.

The FWO is also seeking a Court order which would require the directors to sign up to its online portal and undertake learning courses.

The matter is listed for a directions hearing in the Federal Circuit Court in Brisbane on March 25.

SmartCompany contacted A&K Property Services for comment but did not receive a response prior to publication.

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