Directors of companies who knowingly and deliberately
contravene the Fair Work Act 2009 (Cth) may be ordered by the Court
or Commission to pay high penalties.
The Federal Circuit Court of Australia has ordered the director
of a security company, Owen Ivor Jennings, to personally back-pay
employees who were underpaid by Step Ahead Security Services in the
decision Fair Work Ombudsman v Step Ahead Security Services Pty Ltd
 FCCA 1482.
What is this case about?
Step Ahead is a security company owned and controlled solely by
Mr Jennings. Step Ahead contravened the relevant Modern Award by
failing to pay employees the rates of remuneration set out in the
Award or the loadings and entitlements as set out in the Fair Work
Act. Instead, Step Ahead paid employees flat hourly rates, ignoring
the penalty rates for work performed on Saturday, Sunday, public
holidays or work performed overtime.
Step Ahead also failed to pay the employees the correct minimum
wage rate, casual loading, broken shift allowance and failed to
comply with minimum shift lengths pursuant to the Modern Award.
In total, Step Ahead underpaid employees a total of $22,779.
Lifting the corporate veil
Section 550(1) of the Fair Work Act provides that a person who
is "involved" in a contravention of the Act is taken to
have contravened that provision themselves. This section ultimately
removes the corporate veil and allows executives of companies to be
personally liable for breaches committed in the course of their
management of a company. As such, this section allows for the court
to make an order for compensation which covers the whole loss
caused by the contravention, not just the loss directly caused by
the particular director.
What did the court order?
Judge Jarrett found that both Step Ahead Security and Mr
Jennings demonstrated "calculated and deliberate conduct"
which amounted to a "blatant disregard for Australia's
workplace laws and the rights and entitlements of the
employees". The underpayment was a significant contravention
and Mr Jennings, as the controlling mind of Step Ahead, was well
aware of the requirements of the Award. As such, he ordered that
Step Ahead Security and Mr Jennings jointly pay the $22,889.72
owing to the employees.
Further, Judge Jarrett determined that significant penalties be
imposed due to the need for specific deterrence. Mr Jennings was
ordered to pay penalties in the amount of $51,400 and Step Ahead to
pay penalties in the amount of $257,000 for contravening the Fair
Work Act. An injunction was also imposed which restrained Mr
Jennings from underpaying security industry workers in the
What does this mean for employers?
This case sets an important precedent that the Court or
Commission may hold business owners, directors or company
executives directly accountable and responsible for breaches of the
Fair Work Act. Employers in these positions must be mindful of
their duties under the Fair Work Act.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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