No hibernation for the Fair Work Ombudsman: Record penalties secured for wage non-compliance

Legal Practice Director

By Andrew Piper and Lindsay Carroll, NRA Legal

The pandemic hasn’t hindered the Fair Work Ombudsman’s (the FWO) efforts to investigate and prosecute wage non-compliance in the retail and fast food sectors. The FWO has recently secured record penalties against companies that have underpaid their workers and failed to satisfy their recordkeeping obligations.

In May, following prosecution by the FWO, the Federal Court issued the operators of three Hero Sushi outlets with record penalties of $891,000. In the same month, the FWO have also secured penalties of $209,000 against two restaurants in Melbourne.

Payroll officers fined for fishy employment records

In February 2019, the FWO undertook court action against the operators of Hero Sushi outlets in Newcastle, Canberra and the Gold Coast. This action was the culmination of an investigation that began in 2016 when the FWO was actively targeting sushi businesses.

The court’s decision makes for sobering reading. In his reasons, Justice Flick notes:

This is a case about greed and the exploitation of the vulnerable. Those in a position to ruthlessly take advantage of others pursued their goal of seeking to achieve greater profits at the expense of employees. In doing so, a great number of false documents were deliberately and repeatedly created with a view to concealing the fraud being perpetrated. Lies were told to cover up the wrongdoing. It was only when the “game was up” that those responsible admitted their misdeeds.”

Among the many transgressions that occurred, Fair Work Inspectors identified that the employees were underpaid minimum hourly rates, casual loadings, penalty rates, overtime, clothing allowance and annual leave entitlements. The investigation found that the outlets were paying staff flat rates as low as $12 an hour. Alarmingly, the inspectors also found a number of false documents that were created with the intention of covering up the underpayments.

In addition to penalties being ordered against the Company, both directors were individually fined as well as three members of the Accounts Team who were employed by Hero Sushi. The employees were penalised for the passive role they took in falsifying employment records.

Melbourne restaurateur burnt by underpayment penalties

The owner of the Dainty Sichuan and Tina’s Noodle Kitchen restaurants in Melbourne has personally been fined $15,000 while his companies have been ordered to pay penalties of $183,000 for employee underpayments.

An investigation by the FWO found that the employees of the restaurants were mostly migrant workers on working holiday or student visas. It was identified that 30 employees across the two restaurants had been underpaid a total of $30,995.

The contraventions arose due to the payment of flat hourly rates that did not make allowances for weekend and public holiday penalties or overtime. Similar to the Hero Sushi matter, penalties were applied for failures to keep the required employee records and to provide payslips

Compliance in focus

Despite the turmoil caused by a global pandemic, compliance remains in focus at both the federal and state levels. As an industry association representing employers in the retail and fast food industries, the NRA has always maintained that compliance with the law is paramount to ensure fairness not only between employers and employees, but between employers.

Of course, the enforcement of the law needs to be balanced against the difficulties inherent in complying with an industrial relations system that the Prime Minister recently declared as “not fit for purpose”.

Over coming months, employers can expect that compliance will remain in the spotlight as various state governments take steps to tighten up enforcement regimes and the federal government’s “Compliance Working Group” explores solutions this complex problem.

In the meantime, there are a number of basic steps an employer can take to ensure their payroll practices are compliant and fit for purpose:

NRA Legal offers a number of sophisticated pay tools to assist employers to remediate wage non-compliance in their businesses. As a not-for-profit incorporated legal practice with expertise in the retail, fast food and hospitality awards, these tools offer a cost-effective solution for futureproofing payroll risk coupled with our leading industry insight.

For more details, speak with one of our workplace advisors call NRA Legal on 1800 572 679.