Think It Smooth to Underpay Employees? The FWO Calls It ‘Criminal’

2017 Fair Work Annual Report

A summary of the year’s most expensive litigation outcomes, recoveries, main culprits, new initiatives and regulations

 

TSheets has analysed and compiled the key takeaways from the 2016-17 annual report released by the Fair Work Ombudsman (FWO). Learn what the independent statutory office has been busy doing in the past financial year, along with Fair Work Commission and Registered Organisations Commission’s (ROC).

 

Types of enforcement tools and frequency of enforcementBoots on the ground

Using the statutory and non-statutory enforcement tools available to Fair Work Inspectors, the enforcement outcomes in 2016-17 went up 12% from the year before.

 

Infringement notices

These are on-the-spot penalties specifically for record-keeping or payslip contraventions. The fines are dependent on the company’s compliance history and the severity of their insufficient record-keeping. Approximately 665 notices were issued in this past financial year.

 

Compliance notices

Compliance notices are formal documents for companies with specific to-do lists in addressing the alleged entitlement-based breaches. These are issued when FWO suspects a company will otherwise not rectify the violations on their own. Continued ignorance will result in FWO taking court action.

 

Recovered payments and penalties issues by Fair Work Inspectors 2016-17Enforceable undertakings

These are legally binding agreements in which the company agrees to acknowledge, address and prevent future contraventions. This can include back-payments, training sessions for the management team and independent wage audits. Non-compliance with an enforceable undertaking can result in court action as well.

 

Litigations commenced

Court action happens when the employer continuously refuses to comply and cooperate or has had a history of unattended non-compliance.

In the 2016-17 period, FWO initiated 55 civil penalty litigations where 50 cases were decided. If numbers tell a story, then these cases form a numerical anthology, where two themes thread through all: underpayments and record-keeping.

Most unfortunate of all is how proper record-keeping is, in truth, a task that can be easily automated for accuracy and transparency with employee timesheet apps or payroll software. In other words, these contraventions were absolutely preventable.

Not convinced penalties and fines can add up? Below are the top 10 most expensive fines and recovered payments from Fair Work’s civil proceedings.

 

top 10 fair work fines 1Grouped Property Services Pty Ltd
Recovered Underpayments: $447,300.00
Pecuniary Penalties: $223,244.66

 

top 10 fair work fines 2Mamak Pty Ltd
Recovered Underpayments: $294,848.00
Pecuniary Penalties: $87,344.05

 

top 10 fair work fines 3Tsuyosetsu Pty Ltd
Recovered Underpayments: $201,150.00
Pecuniary Penalties: $148,710.55

 

top 10 fair work fines 4Maroochy Sunshine Pty Ltd
Recovered Underpayments: $227,300.00
Pecuniary Penalties: $77,649.16

 

top 10 fair work fines 5Sakuraya Warrigal Pty Ltd
Recovered Underpayments: $196,000.00
Pecuniary Penalties: $54,594.97

 

top 10 fair work fines 6ACC Services (AUST) Pty Ltd
Recovered Underpayments: $221,760.00
Pecuniary Penalties: $23,479.53

 

top 10 fair work fines 7Hiyi Pty Ltd
Recovered Underpayments: $150,000.00
Pecuniary Penalties: $84,047.32

 

top 10 fair work fines 8Gaura Nitai Pty Ltd
Recovered Underpayments: $150,000.00
Pecuniary Penalties: $84,047.32

 

top 10 fair work fines 9Bijal Girish Sheth
Recovered Underpayments: $189,000.00
Pecuniary Penalties: $21,065.31

 

top 10 fair work fines 10Waterfall Feedlot Pty Ltd
Recovered Underpayments: $130,000.00
Pecuniary Penalties: $38,254.58

 

Breakdown of contravention types and percentages in civil litigationsSome breaches of the Fair Work and Fair Work Amendment Acts are considered criminal offences. The word is not thrown around carelessly or simply for effect. Different from civil proceedings, individuals found guilty of intentionally providing false or misleading information to government investigators or giving, receiving or soliciting bribes and cash in-kind payments will face both imprisonment and monetary fines.

 

Litigation and accessorial liability

Under section 550 of the Fair Work Act, a prosecution is not limited to the company or employer, but to any person in the organisation or third party believed to be “involved in” the contravention.

Under these provisions, these individuals and third parties can be:

  • a company director.a human resources manager or another manager.
  • an accountant.
  • a business involved in the supply chain.

As of July 2017, the possible penalties that can be imposed on corporations and individuals rose from $54,000 and $10,800 to $63,000 and $12,600 respectively for each contravention of the Fair Work Act 2009.

Breakdown of penalties sought in 2016-17:

  • $1.1 million ordered against individuals named as accessories
  • $2.2 million ordered against businesses
  • $1.5 million against labour supply chains and labour-hire companies
  • 48 directors identified as accessories
  • 84% of cases put before the courts involved at least one director

 

The culprits and victims

The hospitality industry accounts for:

  • 36% of anonymous reports received.
  • 17% of disputes resolved by FWO.
  • 39% infringement notice issued.
  • 27% of court action commenced.

Meanwhile, Labour Procurement and Supply Chain made up 93% of court action commenced.

Migrant workers only make up 6% of the Australian workforce, but they were involved in:

  • 12% of anonymous reports received.
  • 18% of workplace disputes.
  • 49% of commenced court cases.

Young workers, those aged between 15 and 24, account for 15% of the working population in Australia. They were involved in 28% of workplace disputes and 44% of commenced court cases.

 

The new kids on the block

To help in its continued effort to create a fair workplace, the FWO established the Registered Organisations Commission in May 2017. It’s an independent body that oversees the organisations registered under the Fair Work (Registered Organisations) Act to help them understand their obligations and monitor financial governance. They also conduct inquiries or investigations where appropriate.

The Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 also went into effect as of September 2017, in response to the increasing number of impressionable young and migrant workers involved in workplace contraventions. On top of increased penalties, the act will put more accountability on franchisors and holding companies, should their franchisees go rogue.

 

Don’t make the FWO come for you

In an open letter to the people of Australia, the Fair Work Ombudsman wrote about how her agency hears from hundreds of workers and employers every day. For the most part, employers take their workplace responsibilities seriously and make honest mistakes, but that cannot be said for all.

There are those who seem to “invest all their energies into actively looking for ways to exploit legal frameworks” to gain unfair advantages over competitors. To this, Ms James has a very particular set of skills. Skills that make her a nightmare for unscrupulous business owners. And the message is crystal clear: If any business thinks they’re above the law, then the law is coming for them.

 


Stay on the right side of the FWO. TSheets time tracking can help you keep accurate employee timesheets.

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