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Poor record keeping leads to $120,000 penalty

Submitted on Thursday, 1st March 2018

The Federal Circuit Court (the Court) has ordered penalties of over $120,000 against a plumbing business and its owner after declaring a number of contraventions of the Fair Work Act 2009 (the Act). The business was found to have breached a number of terms of their enterprise agreement, including the minimum rates of pay, failing to pay overtime and allowances, and failing to pay personal and annual leave including leave loading. The amount included an additional penalty for failing to make and keep records and provide payslips in line with the Fair Work Regulations 2009 (Cth).

In August 2014, a junior apprentice commenced a trial position at the plumbing business, and then began working as an employee on 12 September 2014. On 17 September, he received a letter welcoming him to the business and stating he had started with the business as a second-year apprentice. During the three months of employment, he was paid second year apprentice wages for ordinary time. Despite this, he was working 10 to 12 hour days. The apprentice claimed he felt he couldn’t say no to these additional hours as he didn’t want to ‘jeopardise the prospect of formalising his apprenticeship’. The worker kept a personal record of his hours of work and submitted them to the ‘office lady’ each week. He recorded 201 hours of overtime in the three months he worked with the business.

When the worker enquired about his pay, the owner told him he would be paid his overtime separately. On two occasions he was paid in cash, however when the employee enquired about further payments, the owner kept delaying payment. Shortly before Christmas, and despite positive feedback over his period of employment, the worker was notified he had not successfully completed his probation period. He was then given the choice to extend his probation or to resign with a reference. After having his employment terminated, the employee made a number of requests for his outstanding wages to be paid. The owner responded with a number of aggressive and frustrated texts.

Despite not being formally registered as an apprentice, the worker was paid apprentice wages, which resulted in him being underpaid over $26,000. The rates of pay were set out in an enterprise agreement and the worker should have been paid at the labourer rates. Due to the underpayment, the worker was only paid one fifth of his entitlements. Additionally, as he was not formally registered as an apprentice, the time spent working did not count towards his apprenticeship certificate. After the Fair Work Ombudsman (FWO) became involved, the respondents rectified the underpayments, a factor the court considered to ‘weigh heavily in their favour’. The two respondents however gave no apology or statement of regret in this case.

Whilst the Court acknowledged the respondent ultimately admitted to the contraventions, they found it ‘difficult to see that any arguable defence was available to the respondents’. The admission therefore ‘also saved the respondents considerable expense’. The business and owner were unable to produce timesheets to the Court or the FWO. The Court held that ‘given the statutory requirements upon employers with respect to record-keeping, a Court would accept even the most slight and generalised evidence of an employee as to the hours of employment’ if the employer is unable to produce appropriate records. The Act has recently been amended to place responsibility on the employer to disprove claims made by an employee regarding employee record contraventions. In effect, ‘if the employer fails to keep timesheets and provide payslips the employer has the burden of disproving an employee’s claim about hours worked and payments made’.

Orders were made for the business to pay $100,000 and the owner to pay $21,500 in penalties within 90 days for the contraventions of the FW Act. It has become common practice in the Federal Circuit Court for both a business and its owner to be named as respondents to allegations by the FWO. This case highlights the importance of complying with the Act and relevant industrial instrument, including in relation to employee records, and the implications for both the business and an individual for non-compliance. Our Employment Law: A Practical Perspective training program provides practical strategies and advice to help ensure your business meets its workplace responsibilities.


This article was written by Megan Wood, Workplace Relations Advice Line Advisor at the Victorian Chamber.

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