Even something as simple as failing to provide sufficient meal breaks can cost a business in penalties and backdated entitlement payments to employees.
A Federal Circuit Court of Australia case from 2017 provides a useful example of both the types of issues that employers regularly get into trouble for and the importance of taking the right steps to acknowledge shortcomings and rectify any breaches against applicable industrial legislation.
In the case of Fair Work Ombudsman v Something Aussie Pty Ltd * three employees of a small retail business, which sold Australian themed gifts to tourists, complained to the Fair Work Ombudsman and sought a civil remedy against their employer for numerous underpayments.
The Breaches
The Fair Work investigation revealed that the company breached the Fair Work Act (Act) by failing to pay its employees as prescribed under the General Retail Industry Award 2010 (Award). This included failure to pay:
- minimum rates of pay;
- casual loading (for Monday to Saturday);
- casual loading for Sundays;
- Saturday penalty rates;
- Sunday penalty rates;
- public holiday penalty rates;
- annual leave and annual leave loading to one of the employees on termination of her employment.
Further, the business failed to engage its employees for a minimum of three hours a day and failed to provide meal breaks of at least 30 minutes after five hours work as outlined in the Award.
The evidence and admitted facts in the proceedings established that the business operator had knowledge of the matters which breached each of the provisions of the Act and the Award.
Consequently, the Court ordered that the business pay a fixed amount of $101,400.
The business operator was also ordered to pay a penalty in respect of his involvement in the breaches of $20,280.
What was considered to determine the penalties ?
A non-exhaustive list of factors relevant to the imposition of a penalty was usefully summarised by Mowbray FM (as he was then) in Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar*. The factors included:
- the nature and extent of the conduct which led to the breaches;
- the circumstances in which that conduct took place;
- the nature and extent of any loss or damage sustained as a result of the breaches;
- whether there had been similar previous conduct by the respondent;
- whether the breaches were properly distinct or arose out of the one course of conduct;
- the size of the business enterprise involved;
- whether or not the breaches were deliberate;
- whether the party committing the breach had exhibited contrition, taken corrective action and cooperated with the enforcement authorities;
- the need to ensure compliance with minimum standards by provision of effective means for investigation; and
- the need for specific and general deterrence.
While the summary is a convenient checklist, it does not prescribe or restrict the matters which may be taken into account in the exercise of the Court's discretion.
General Deterrence
One of the central purposes of imposing a civil penalty, in proceedings such as these, is to deter other employers from embarking on a similar course of conduct to that engaged upon by the transgressing employer.
Landen J said in Ponzio v B & P Caelli Constructions Pty Ltd*:
.... In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend...
Key Takeaways for Employers
A significant amount of court time and public expenditure was saved through the honest declaration of breaches by the business operator.
If your business is investigated by the Fair Work Ombudsman, we recommend you seek legal advice and co-operate during the investigative process by providing all appropriate documents and records as requested.
How did this matter end for Something Aussie ?
The employees were compensated the full underpayment of $91,238.64. In addition, the business operator made superannuation contributions to each of the employees superannuation funds, compensating for the underpayment of superannuation that occurred as a result of underpayment of wages.
The business co-operated fully with the Fair Work Ombudsman and engaged an external consultant to ensure that their ongoing employment practices were compliant with applicable industrial legislation.
Something Aussie implemented the following measures to enable its continuing improvement following the investigation. These measures are useful for all employers to consider:
- the preparation of new employment contracts that comply with all relevant common-law and statutory requirements;
- the creation of position descriptions for employees;
- a HR Policy manual;
- training for the workforce in a number of areas; and
- a better workplace culture that values diversity.
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.
