In these difficult economic times it is common for small
businesses to experience liquidity and cash-flow problems. Under
these situations it is natural for a small business to concentrate
on paying those people that keep the business afloat. However, it
is important that a business does not disregard its obligations as
It must be emphasised that Fair Work Australia considers that
financial difficulties and/or a lack of knowledge regarding the
relevant industrial laws and rates of pay do not justify a failure
to provide adequate pay for your employees.
The case of FWO v Promoting U Pty Ltd & Anor  FMCA
58 is a good example of the consequences which can result from
underpaying employees. Promoting U and its director, Sebastian Boi
('the respondents') were found to have committed 16
breaches of workplace relations laws including underpayments and
record keeping breaches.
Four employees working as graphic designers for the respondents
were underpaid wages and three of the employees were additionally
not paid their accrued annual leave entitlements upon leaving the
The contraventions made by the respondents were a direct result
of a combination of a lack of knowledge of their true obligations
in some instances and in each and every instance caused by a lack
of operating funds.
It was also found that the respondents became aware that their
conduct was inadequate and failed to make restitutionary payments
for a long period of time despite promising to do so. According to
Federal Magistrate Burchardt, these breaches were deliberate,
persistent and repeated, and that it was important to publicly
denounce repeated contravening conduct.
In addition to repaying almost $11,000 in owed wages, the
Federal Magistrates Court fined Promoting U Pty Ltd $65,000 and its
director an additional $13,000. Federal Magistrate Burchardt
attributed the penalty to the importance in publicly denouncing
repeated contravening conduct such as that of the respondents.
It should also be noted that in the last financial year, the
Fair Work Ombudsman recovered a total of $8.215 million for 4182
underpaid workers in NSW, and $26.7 million for 17,360 employees
What does this mean for employers? This highlights the fact that
it is a risky move for an employer to avoid or evade their
obligations under Workplace Relations law simply because they are
struggling. Any attempts to evade the proper payment of wages are
likely to result in an action by the Fair work Ombudsman. Such
action is likely to result not only in the restitutionary payment
of wages, but also significant penalties as punishment for the
contraventions; further exacerbating the businesses liquidity
It is our view that it is neither a sound commercial or legal
option for employers avoiding honouring their obligations to
employees pursuant to the Fair Work Act, including the payment of
However neither is it wise to fail to understand what these
obligations are – lest an employer find they are paying
more than is required to their staff. It is strongly recommended
that correct advice is sought to ensure that your payroll is
correct, but are also structured to work in favour of your
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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