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Perspective

Significant penalties imposed for underpayments

Following a series of underpayment cases including the 7-Eleven cases, the FWO gained access to higher penalties and expanded powers under the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 (Cth). The legislation increased penalties by up to 10 times the ordinary rate for a new category of “serious contraventions”.

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In the case of FWO v Tac Pham Pty Ltd & Anor [2020] FCCA 3036, 80% of the fines imposed were based on “serious contraventions”.

An investigation into Hans Café (the café) conducted by the Fair Work Ombudsman (FWO) found the café, and its general manager at the time, breached their obligations under the Fair Work Act 2009 (Cth), Fair Work Regulations 2009 (Cth) and Restaurant Industry Award 2010 by:

  • underpaying workers by a total of $27,920, and
  • not providing them with adequate pay slips.

The FWO issued proceedings against the café and its general manager at the time, who were fined $37,000 and $7,500, respectively. This predated the updated legislation.

A follow-up payroll audit conducted by the FWO revealed the café continued to underpay workers a total of $5111. Although the business rectified these underpayments shortly after the audit, the FWO again issued proceedings against the café and its former general manager.

The updated legislation was in effect at this time. The Federal Circuit Court issued further fines against the café and its former general manager of $191,646 and $38,392, respectively.

Lessons for employers

  1. In determining a penalty for such contraventions, the court will consider any prior contraventions, the damage/loss suffered, whether they were deliberate, whether corrective action was taken and the need for specific and general deterrence.
  2. A cavalier approach to underpayments will not be tolerated. In this case, the café and its former general manager took corrective action, but only when they were again subject to a FWO investigation. Had they taken steps to conduct their own audit and rectify any underpayments, they may not have been issued with the second proceedings.
  3. Differing cultural views or norms cannot prevail over statutory requirements and constitute no excuse for contraventions. It’s an argument that is often put by employers and always fails, as outlined in another recent article: General Manager relies on cultural differences to mitigate exploitation of workers.

Written by Nes Demir

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Our team is here to provide the right advice for your business and workforce. If you have a question or require assistance, please contact Andrew Douglas.

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