PAY BACK – employer undertakes to reimburse employees more than $2 million in underpayments - Employee Rights/ Labour Relations

What happened?

A Victorian-based mining services company, Deepcore Australia Pty Ltd (Deepcore), has entered into an enforceable undertaking with the Fair Work Ombudsman (FWO) to address extensive underpayment of its employees.

The FWO found that while Deepcore was conducting drilling works at mine sites in Queensland and Victoria, it underpaid over 200 of its former and current employees to the tune of $2.09 million over a 4 year period from July 2010.

Deepcore admitted the underpayments and that they arose during the period of transition to the relevant modern award (the Mining Industry Award 2010). The underpayments related to an industry allowance under that award, and a phasing-in of increased night shift penalties in Victoria and Saturday penalties in Queensland.

For the most part, the underpayments were under $1000 per employee. A number of employees were owed between $1,000 and $20,000. Five employees were underpaid more than $50,000.

The enforceable undertaking requires Deepcore to:

Pay 1.5% interest on all underpayments;
Donate $15,000 to the Loddon Campaspe Community Legal Centre;
Set up a dedicated email address for employees with inquiries about underpayments;
Apologise to all those underpaid;
Display a workplace notice and a media notice in Melbourne's Herald Sun newspaper detailing the contraventions, the terms of the enforceable undertaking and an apology;
Register with the FWO's 'My Account' portal;
Upgrade its systems and processes to ensure future compliance with workplace laws; and
Commission workplace relations training for all managerial staff with human resources and payroll responsibilities.

The FWO acknowledged the voluntary corrective actions Deepcore had undertaken, including:

Making calculations for each affected employee;
Meeting with all current employees to discuss the underpayments and how and when rectification would be made;
Employing a human resources, safety and training manager; and
Organising two representatives from its industry association to attempt to contact former employers.

Deepcore had until 31 May 2016 to make the required payments to its current employees, and has until 18 March 2017 to make the required payments to relevant former employees.

Enforceable undertakings under the Fair Work Act

Section 715 of the Fair Work Act 2009 (Cth) (FW Act) allows the FWO to accept a written undertaking given by a person that the FWO reasonably believes has engaged in contravention of a civil remedy provision. The enforceable undertakings scheme is an alternative to FWO commencing proceedings for breach of the FW Act.

The FWO will consider accepting an undertaking where an investigation has shown that workplace laws have not been followed, the employer is prepared to voluntarily rectify the issues and agrees to implement actions to prevent future breaches occurring. The investment required of an employer may be significant.

Enforceable undertakings are published on the FWO's website.¹

If the FWO considers that the person who has given the undertaking has contravened any of its terms, the FWO may apply to a court for enforcement.

Lessons for employers

The FWO said " this matter highlights the need for employers to take the time to ensure they are aware of the correct minimum lawful entitlements that apply to their employees... underpayments of minimum entitlements, left unchecked over time, can lead to employers facing big back-payment bills they were not budgeting for".²

The Deepcore case also highlights the need for employers to:

Conduct a proper analysis of awards applying to their workforce and ensure that systems and processes are in place to ensure those awards are complied with;
Keep accurate time and wage records as required;
Have audit tools in place to ensure ongoing compliance; and
Monitor and implement any changes to award requirements as they arise.

The FWO has also recently entered into enforceable undertakings with Oaks Hotels & Resorts Ltd and Housekeepers Pty Ltd after the FWO determined their employees were being underpaid and wrongly classified as independent contractors. In addition to back payments, the relevant employers were also required to each make a $20,000 donation to the Cleaning Accountability Framework to fund education about workplace rights under the FW Act.

Since the FW Act commenced in 2009, there have been a total of 115 enforceable undertakings entered into with the FWO. Their use has increased steadily over time - from 4 in 2009-2010 to 27 in 2015-2016.

FWC 4 yearly modern award review

The FWC must review all modern awards every 4 years and is currently conducting that 4 yearly review (commenced in January 2014).

A list of awards under review can be viewed here.
The timetable can be viewed here.

Employers should monitor the award outcomes relevant to their employees and ensure that any changes to modern award conditions are complied with.

Footnotes

¹ See: Fair Work Ombudsman: Enforceable undertakings

² See: Fair Work Ombudsman: Mining services company short-changes 205 employees more than $2 million

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