Businesses should act now to ensure they understand the requirements and have confidence their employees are receiving the correct rates of pay and entitlements.

Prior to 1 July 2021, a business underpaying an employee may have found themselves investigated and prosecuted by the Fair Work Ombudsman, for contraventions of the Fair Work Act 2009 (Cth). Now, a business may also be pursued by the Wage Inspectorate and subject to more severe penalties.

Case Study

In October 2020, the Federal Circuit Court of Australia (the “Court”) fined a grocery store and its owner for underpaying two employees.

In 2016, the business employed two new employees, both of whom were on working visas. The first employee was employed for a period of three months and twelve days and was paid $12 an hour. The second employee was employed for a total of two months and fifteen days and was initially paid $10 an hour, however after complaining about the rate of pay, she was paid $11 an hour.

Neither employee was made aware of, or received, any personal or annual leave entitlements or accruals. Similarly, they never received pay slips.

During the Court proceedings the business owner claimed to be unaware of the minimum entitlements applicable to these employees despite being a highly educated economics professor. It was noted that prior to engaging these employees, in February 2015, the business was under investigation following an unfair dismissal claim concerning another employee. It was during this investigation the business informed the Fair Work Inspector they were unaware of the applicable award and minimum entitlements for their business. The Fair Work Inspector at the time went through the owner’s obligations regarding commonwealth workplace laws and award coverage.

The Court concluded the business failed to pay appropriate minimum wages to both employees, let alone award base rates, overtime rates and penalty rates. Upon termination of employment, accrued annual leave was not paid and requirements for record keeping and payslips were not met.

The business was ordered to pay pecuniary penalties of $90,000. Had the wage theft legislation been in force the business may have also been pursued by the Wage Inspectorate resulting in the business and its officers facing larger penalties and even imprisonment.

Underpayment of wages and wage theft laws

Businesses, business owners, managers, and HR professionals should be aware of the appropriate industrial relations instrument that applies to their employees to ensure they are meeting their minimum obligations. Underpayments can be claimed for the previous six years which is why in the case above, the employees were still able to make a claim four years after the employment relationship ended. Every business must ensure they are meeting their obligations. This includes paying employees correctly and retaining and maintaining employee records.

With the introduction of new wage theft laws in Victoria, the stakes are even higher as businesses, directors and officers are at risk of being criminally liable. If the business, its directors, or officers have committed an offence, penalties may be imposed including $198,264 of fines for individuals, up to $991,320 for companies and/or up to 10 years’ jail time.

Practical suggestions for employers

The Victorian Chamber encourages employers to consider their statutory obligations when remunerating employees.

Take proactive steps to be aware of your obligations and ensure compliance by:

Regularly reviewing which, if any, modern award/s apply

• Taking advice to ensure you understand and are complying with all requirements, including, for example, minimum rates of pay and employee entitlements
• Regularly reviewing classification levels for all positions to ensure each is appropriately classified under the modern award.

Ensure your documentation is compliant with the requirements of the Fair Work Act 2009 (Cth), the Fair Work Regulations 2009 (Cth) and the modern award. This includes record keeping requirements, payslips and other administrative practices such as agreements to vary ordinary hours of work.

If you have identified an underpayment, ensure any back payment is made in a timely manner.

Subscribe to the Victorian Chamber Modern Award Subscription service to receive timely updates.

Call the Workplace Relations Advice Line on (03) 8662 5222 to receive up to date and practical recommendations for navigating the industrial relations landscape.

Contact us for support

The Victorian Chamber has a variety of resources available to assist your business and help you manage modern award requirements and meet minimum pay rate obligations. For immediate assistance with employee entitlements, rate of pay and/or impact of the recent changes, please contact the Workplace Relations team on (03) 8662 5222.

[2020] FCCA 2924