Award breach fines biting careless employers

Heavy WorkChoices penalties are hitting employers, and there is no sign the Rudd Government will soften them. Employers will be left with all the pain of WorkChoices and little of the gain. By PETER VITALE.

By Peter Vitale

As heavy WorkChoices penalties bite employers and there is no sign the Rudd Government will soften them, employers will be left with all the pain of WorkChoices and little of the gain.

Three recent cases have highlighted how important it is for small and medium sized businesses to sure they are meeting minimum obligations to employees. 

The substantial increase in penalties introduced with the Howard government’s WorkChoices legislation are really biting, as the Office of Workplace Services (OWS) is aggressively pursuing employers that have been found to have underpaid employees.

And the courts are sending a clear message to the business community – if you get it wrong, you will be punished.

Penalties are now at a maximum of $33,000 for each separate breach. Commonly in cases of this nature, there are several separately identifiable breaches, so fines can exceed $100,000.

In one case involving Pee Cee Pty Ltd, the Federal Magistrates Court fined the employer, the operator of a hairdressing and beauty salon business, almost $28,000 for underpaying an employee a little under $6000.

The court commented that “the failure by an experienced employer to comply with the Act should be taken into account in determining any penalty”.

In another case, Merringtons, a large retailer of optometric supplies, was found guilty of a number of award breaches resulting in total underpayment of wages of approximately $17,000.

The Magistrates Court of Victoria imposed a penalty of $88,000, which was reduced by the Federal Court on appeal to $66,000.

The employer was also fined $60,000 for breaches of the Freedom of Association provisions of the act because it took retaliatory action against one of the employees who had complained of underpayment to OWS.

More recently a large retail and manufacturing butcher trading as “Joe’s Meat Market” had employed a 21-year-old as a salesperson, with a view to possibly entering into an apprenticeship arrangement.

For a period of six months the employee was paid at the apprentice rate, rather than the sales person’s rate. This resulted in an underpayment of approximately $9000, which was about 45% of what his total wages should have been.

The Federal Magistrate decided that the penalties should “impact on the corporate memory” of the employer. Penalties of over $93,000 were ordered.

The courts have identified a number of general considerations that will be taken into account in imposing a penalty on an employer who has underpaid employees:

• The nature and extent of the conduct that led to the breaches.
• The circumstances in which that conduct took place.
• The nature and extent of any loss or damage sustained as a result of the breaches.
• Whether there had been similar previous conduct by the respondent.
• Whether the breaches were properly distinct or arose out of the one course of conduct.
• The size of the business enterprise involved.
• Whether or not the breaches were deliberate.
• Whether senior management was involved in the breaches.
• Whether the party committing the breach had exhibited contrition.
• Whether the party committing the breach had taken corrective action.
• Whether the party committing the breach had cooperated with the enforcement authorities.
• The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements.
• The need for specific and general deterrence.

These cases are but a few examples of the approach of the courts to underpayment cases. In each case, there were multiple breaches found, the maximum penalty for which could have been significantly higher than those that the courts ultimately imposed. The lessons for employers are clear:

• You must be proactive in finding out exactly what your legal obligations to your employees are – the courts will not accept ignorance as an excuse.
• Keep reviewing the circumstances of individual employees; changed rosters or increased seniority are two examples of circumstances that could substantially alter the wages payable under an award or Australian Pay and Conditions standard.
• Senior management of SMEs are usually familiar with at least a reasonable degree of detail in relation to employee wages. The higher up the responsibility for breaches of the law goes, the higher the penalties – make sure that you are absolutely satisfied that people are being paid the correct wages, even if you have delegated the responsibility to someone else in your team.
• If you discover an underpayment, the general rule is; get advice and rectify it as quickly as possible. This will often avoid litigation which is costly for you, your bank balance and your business’s reputation.

Peter Vitale is the principal of CCI Victoria Legal