Transport business owner cops $42,000 fine after underpaying driver and restructuring business

The owner of a Victorian transport business has been fined $42,075 after underpaying a truck driver and then restructuring his business in an attempt to avoid back payment.

The owner of the Newstead-based freight transport business was fined by the Federal Circuit Court in Melbourne.

The truck driver was underpaid $41,303 between 2005 and 2010 through underpayment of the minimum cents-per-km rate, wages, annual leave entitlements, public holiday pay and wages in lieu of notice.

After the driver lodged a complaint, the Fair Work Ombudsman investigated and launched legal action in 2011 against both the owner and the business.

The business was subsequently placed into liquidation, preventing the FWO from seeking fines and back-payment orders against it.

In his judgment, Judge Grant Riethmuller found the transport business had continued to operate through a new entity, with the owner still as the controlling person.

“It appears that arrangements were put in place to ensure that any underpayments and penalties would not be able to be recovered,” he found.

Judge Riethmuller found the owner had “actively engaged in what is loosely described as asset stripping of the company in order to continue the business through a separate entity”.

In imposing a penalty that was 85% of the maximum available, he said: “there is clearly a need for deterrence”.

He ordered most of the owner’s fine go towards rectifying the underpayment of the truck driver.

Acting Fair Work ombudsman Michael Campbell said the court’s decision sends a strong and important message that attempting to avoid paying an employee’s minimum entitlements is a serious matter and will not be tolerated.

“Successful legal actions such as this also benefit employers who are complying with workplace laws because it helps them to compete on a level playing field,” Campbell said in a statement.

Rachel Drew, partner at law firm TressCox Lawyers, told SmartCompany the FWO is entitled to pursue the director of a business in their personal capacity, so in many cases the concept of stripping a company, or ‘phoenixing’ it, is going to be ineffective.

“That type of activity and attempt to avoid a liability for unpaid wages would probably affect the amount of penalty that would be awarded against the employer and the court will be more likely to impose a higher penalty,” she says.