Toy retailer faces upwards of $3 million in penalties as Fair Work Ombudsman seeks to flex new muscles

A Melbourne toy retailer is facing upwards of $3 million in penalties over allegedly underpaying eight international workers on rates as low as $6.70 an hour.

The Fair Work Ombudsman (FWO) has launched a case in the Federal Circuit Court against IE Enterprises Pty Ltd, which has operated eight pop-up toy stores in shopping centres throughout Victoria.

It is alleged the business and its sole director paid workers unlawfully low rates, did not pay some workers at all and committed several payslips and record keeping breaches.

The case is likely to be closely watched as it will be the first time the Fair Work Ombudsman seeks to invoke serious contravention provisions for vulnerable workers.

The provisions, introduced in 2017, increased the maximum penalties for serious contraventions of workplace laws by a factor of 10 — to $630,000 per breach for a company and $126,00 for an individual.

The FWO is alleging five serious breaches which could carry those penalties as well as a series of related allegations.

It is also alleged the business made an unlawful deduction from one employee’s wages and provided payslips with incorrect business names and numbers.

The workers were all temporary visa holders from countries including Malta, the Netherlands and Korea, aged in their 20s.

Alleged underpayments total $21,748, ranging from $395 to $5,041, and have allegedly not been rectified.

Fair work ombudsman Sandra Parker says the FWO will also be utilising new reverse onus of proof provisions in its case, which apply when a business fails to keep adequate records.

“We’re arguing that five alleged contraventions are serious because Uncle Toys and its director failed to correct the non-compliance, despite extensive engagement with us,” Parker said.

The case will be the second time the FWO has sought to utilise its relatively new reverse onus of proof powers, which have yet to be tested in court.

Parker has previously said she intends to use all the tools at her disposal to prosecute underpayment cases, including chasing maximum penalties where possible.

If the FWO wins, workplace lawyer Peter Vitale says the Court will take into account the circumstances of the business, but also the parliament’s motivation for introducing tougher penalties.

“Parliament has clearly indicated a desire to impose more stringent penalties on conduct of this nature,” he tells SmartCompany.

“You can expect the penalties will well and truly exceed the penalties we’ve seen under the old legislation … predicated on a finding of guilt.”

In regard to the reverse onus of proof laws, Vitale says the case will be closely watched as the legislation doesn’t provide “a lot of detail” about what might constitute a reasonable excuse for not keeping adequate records.

“The employer would need to show they either have the records or there is a reasonable excuse as to why they haven’t got them,” he says.

A directions hearing is listed in the Federal Circuit Court in Melbourne for August 2.

IE Enterprises Pty Ltd was unable to be contacted for comment on Wednesday morning.

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

NOW READ: ‘Unsustainable’ $5 pizzas: Fair Work boss Sandra Parker chases higher penalties for dodgy retailers