Recent penalties imposed by various courts have been significant
even in cases where employers have seemingly made genuine errors
and even in circumstances where the underpayments involved have
been comparatively small. The judgements illustrate the need for
vigilance by employers in ensuring that they are compliant with
legislation and industrial instruments.
Fair Work Ombudsman v DZ Import & Export Trading Co &
In this case, the Fair Work Ombudsman (FWO) prosecuted the
director of a company that underpaid several of its employees. The
Federal Magistrates Court considered that large penalties were
appropriate in the circumstances because of the size of the
underpayments, the fact that the employees involved were vulnerable
(they were migrant workers) and because the employer had failed to
rectify the matter.
While the total of the underpayments was about $21,000, the
director and his company were fined an aggregate amount over
Fair Work Ombudsman v Stewarts Transport & Logistics Pty
Limited & Ors
Federal Magistrate Riley recently imposed over $60,000 in
aggregate pecuniary penalties against an employer company and its
two shareholders who had underpaid an employee by $3,000 over a
period of three months.
The penalties related to several different offences including
failure to pay correct casual loadings, penalty rates, shift
allowances and inadequate record keeping. Each of the offences
carried with it a separate penalty.
Fair Work Ombudsman v Computermark Pty Limited & Ors
The Magistrates Court of Victoria recently imposed penalties on
a Fitzroy café operator who underpaid two casual employees
by $8,736 collectively.
The cafe was fined a total of $120,800 in penalties –
more than 13 times the actual amount of the underpayment.
How are these penalties determined and calculated?
In Mason v Harrington Corporation Pty Limited 
FMCA 7 (at paragraphs 24 to 55) Federal Magistrate Mowbray listed a
number of factors that had been taken into consideration by the
Federal Court in several different matters in determining a
penalty. These were:
The nature and extent of the conduct
The circumstances in which the conduct took place
The nature and extent of any loss or damage
Whether there had been similar previous conduct by the
Whether the breaches were properly distinct or arose out of one
course of conduct
The size of the respondent company
The deliberateness of the breaches
The extent to which senior management was involved in the
The corporation's contrition, corrective action and
co-operation with enforcement authorities
Where there are multiple breaches for which penalties are to be
imposed, the correct approach to imposing penalties is set out in
various cases. Federal Magistrate Riley summarised the approach in
the following steps:
Identify the separate contraventions involved
Consider what penalty is appropriate with reference to each of
Examine the extent to which two or more contraventions have
common elements as the defendants should not be penalised more than
once for their actions
Consider the aggregate penalty to determine whether it is an
appropriate response to the conduct which led to the breaches. This
assessment is made by applying an 'instinctive synthesis'
to make sure the penalty is not harsh or oppressive.
In circumstances where an employer is being investigated by the
Workplace Ombudsman and they have fully co-operated with the
investigation as well as corrected any errors and made back
payments in a timely fashion, this may well mitigate against larger
Voluntary compliance and enforceable undertakings
In addition to fines, there are other implications that
employers should be aware of in instances where they fail to comply
with legislative and industrial requirements.
In July last year, Cotton On Clothing Pty Limited entered into
an enforceable undertaking with the Fair Work Ombudsman whereby the
company posted an apology on its Facebook wall, sent Human
Resources Managers to workplace relations compliance training and
also agreed to provide three consecutive annual reports on its
active compliance. This was in addition to paying in excess of
$330,000 in back pay to employees.
More recently, in January of this year, Toys R Us Pty Limited
entered into an enforceable undertaking whereby it agreed to pay
$998,000 in back pay to affected employees, provide those employees
with letters of apology, send key personnel to relevant training
and commit to paying for auditing by a relevant industry
association to determine the company's ongoing compliance.
When hiring anyone, an employer should be extremely careful to
properly ascertain an employee's entitlements under legislation
and under any applicable award.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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