When is an individual liable for Award underpayments?
Recent penalties awarded against individuals
Wage increase effective 1 July 2015 – a timely reminder
to review pay rates
WHEN IS AN INDIVIDUAL LIABLE FOR AWARD UNDERPAYMENTS?
An individual, not just the employer company, can be liable for
compensation or penalties for Award underpayments, if that
individual is "involved in" the underpayment.
To be "involved in" an underpayment, the individual
aided, abetted, counselled or procured the contravention;
induced the contravention, whether by threats or promises or
been in any way, by act or omission, directly or indirectly,
knowingly concerned in or party to the contravention; or
conspired with others to effect the contravention.
The definition of "involved in" is very broad and will
capture circumstances where an individual has actual knowledge of
the Award which specifies minimum rates and that rates actually
being paid were less than the rates specified. This knowledge can
be inferred, particularly where an individual has worked in the
relevant industry for a significant period of time.
Even individuals who are no longer involved in the
employer's business, but who were involved at the time of the
contravention, can be held liable for Award underpayments.
RECENT PENALTIES AWARDED AGAINST INDIVIDUALS
In February 2015, the Federal Circuit Court of Australia ordered
that the current and several former directors of the employer
company were liable for compensation to an employee who was paid
under the Award.
In April 2015, the Federal Court of Australia ordered that a
director of the employer company pay a penalty in the sum of $8,000
for being involved in Award contraventions, specifically failing to
pay the Award rate for two employees.
In June 2015 the Federal Circuit Court of Australia ordered the
sole director of the employer company to pay a penalty of $28,900
for contravening the relevant Award in respect of 15 employees that
were not paid the minimum wage.
The number of decisions that impose penalties on directors show
that the courts are more than willing to sheet liability home to
individuals in circumstances of Award underpayments.
Although in most cases, the individuals liable are directors of
the company, the liability can extend to individuals who are not
directors. For instance, in the right circumstances, managers and
supervisors could be found to be "involved" in an
underpayment and liable to pay penalties.
WAGE INCREASE EFFECTIVE 1 JULY 2015
As a result of the annual wage review, the Fair Work Commission
was increased the minimum wage, and all Award rates, by 2.5%
effective from the first full pay period after 1 July 2015.
This serves as a timely reminder to review your wage rates to
ensure compliance with the relevant Award and to minimise the risk
of claims against your business or even you personally.
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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An employee that refused a reasonable offer of settlement was ordered by the FWC to pay his ex-employer's legal costs.
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