Employment law expert Patricia Ryan reveals where so many small businesses go wrong
In the third article in our series on Fair Work — where we’ve discussed the secrets of Fair Work and why you should comply — we find out from employment law expert Patricia Ryan what happens when things go wrong.
Patricia specialises in conflict resolution. She has helped hundreds of companies to comply with the Fair Work Act, and in 2014, she founded The Workplace, a Sydney-based employment law firm, to help employers resolve disputes with employees. She says the most common violations she sees are national employment standards breaches, record keeping issues and workers not being paid what they’re owed.
TSheets’ research into Fair Work reveals a similar story.
The fastest way to end up in court
Since 2014, more than 3/4 of the cases the Fair Work Ombudsman has taken to court have been for payroll or record-keeping violations. On average, each employer involved in these cases has had to repay more than $68,000. The largest fine was the wrong side of $800,000.
But of course, not every violation goes this far. The ombudsman settles many more cases out of court and all told, Australian businesses have had to repay almost $190,000,000 in back wages and fines since 2009, when the Fair Work Act passed into law. By comparison, in 2015-16 just $1.4 million was recovered through litigation.
So court cases remain few and far between. But what few business owners realise is that you can still be prosecuted even if your company is not the primary defendant. Bookkeepers and financial advisors beware. In its latest annual report, the Fair Work Ombudsman says:
Nearly every matter we filed in court—92%—roped in an accessory (a party other than the employer who played a role in the exploitation of workers). In 2015-16, this included accountants and human resource managers.
Small businesses are most at risk
Patricia says employers often don’t know anything’s wrong until it’s too late—and small businesses are hit harder because they don’t have the knowledge or expertise to handle the fallout.
“The majority of businesses try to do the right thing,” she explains, “but compliance is complex. It can be especially difficult for small businesses because of the lack of resources to assist them. But any industry that’s covered by an award can struggle with compliance.”
According to Patricia, most prosecutions are triggered by employee complaints or government audits. Either way, it’s a rare thing to see it coming. The hospitality and retail industries are a particular focus for government investigations but they are by no means the only ones at risk. Last year the ombudsman investigated almost 30,000 violations, recovering more than $27 million in back pay for 11,000 workers. That’s $2,500 for every one of them.
The Fair Work Commission may have made things a little easier on businesses recently by cutting penalty rates, but few would want to have to find an extra $2,500 per employee in a hurry.
How to resolve a dispute
The good news is that companies generally get a chance to put things right and repay these wages before they get hit with extra fines or, worse, dragged into court. If you do find yourself in a dispute, Patricia says, “always try to resolve it early.”
The ombudsman even offers advice on how you can do this, because, as Leanne Berry from Love Your Numbers explains, “There isn’t an unlimited budget to go after every offence.”
“With smaller businesses, they often start by issuing a compliance notice,” she adds, “which gives you 28 days to comply. But with larger businesses, depending on the type of offence, that doesn’t always happen.”
If you do find yourself in this situation, Patricia says the best course of action is to start by properly investigating the nature of the dispute. “See if it has merit,” she stresses. “Then, if it does, resolve it. And once it’s resolved, audit your systems to make sure it doesn’t happen again.”
But why wait that long? Surely the best time to audit your systems is right now—before you find yourself in a dispute.
“Non-compliance can lead to serious issues for your business,” Patricia says. “If you get hit with an underpayment claim or a prosecution it can have a big impact on your reputation and even make it harder for you to attract new staff. Start by conducting an audit. Get help from an employment law expert. And put an action plan in place to remedy any areas where you’re not compliant.”
Who’s responsible for Fair Work compliance?
As Patricia says, it’s a good idea to delegate some of the responsibility for compliance to someone who knows the legislation better than you do. But bear in mind that ultimately it is the owners or directors, depending on the structure of the business, who carry the can. Case in point: Many of the fines you can read about in the litigation section of the ombudsman’s website are handed down to individuals as well as the companies they run.
The responsibility for compliance doesn’t end with company owners and directors, either. As we saw in the ombudsman’s latest annual report, anyone found to be ‘involved in’ the company’s contravention of Fair Work protections can be liable to prosecution — including managers and even third-party service providers like HR advisors and accountants.
Last year, an accounting firm in Victoria was told it would be taken to court for allegedly processing payslips that didn’t meet the minimum wage requirements.
“We have been concerned about the role of key advisers such as accountants and HR professionals in some serious and deliberate contraventions,” says Natalie James from the Fair Work Ombudsman.
“Small business relies heavily on trusted advisers, and if they give incorrect or bad advice, or deliberately assist with the contravention, should they not be held accountable? In situations where we believe accountants or other professionals knowingly facilitate contraventions of workplace laws, we are prepared to hold them to account,” she adds.
Could you be violating Fair Work?
Looking at the low levels of compliance in some industries, Patricia’s experience and the amount of money that is recovered in unpaid wages each year, it is very possible that more businesses are violating the Fair Work Act than currently realise it.
The best way to ensure you’re compliant with Fair Work is to hire someone who knows the legislation inside and out. Many bookkeepers and accountants specialise in Fair Work compliance and if you want to take it a step further, HR specialists like Workforce Guardian are almost exclusively dedicated to helping companies adopt the correct awards and agreements for their workplace.
When it comes to tracking employee hours, breaks, annual leave and overtime, TSheets can do a lot to help your business to comply with Fair Work. Your timesheets will be stored for as long as you need them — beyond the seven-year minimum required by the Fair Work Act — and integrations with Xero, QuickBooks and many other accounting and payroll systems means your employee timesheets are synced to every payslip, with a full audit trail.