Record penalties of $891,000 against employers for underpayments
By Ciaran Strachan
Record penalties of $891,000 against employers for underpayments against the Fast Food Industry Award 2010.
The Federal Court today imposed a new record penalty today of $891,000 against the owners of Hero Sush outlets. The judgement tops the FWOs previous maximum penalty of $660,000 for fruit market operators exploiting refugees (full case here).
The broadstrokes of the judgment are as follows:
- Two Company Directors Deuk Hee Lee and Hokun Hwang were individually penalised $85,000.00.
- Three Payroll Officers employed at Sushi head office, Chang Lee, Ji Cho and Jung Kim were penalised $75,000, $16,000 and $30,000 respectively.
- 94 workers across three Hero Sushi outlets were paid flat rates as low as $12 an hour, that’s right, genuine 1990s rates. Resulting in a total underpayment of $700,832.88.
- The operators provided Fair Work inspectors with false records on 11 separate occasions, showing falsified hours of work and pay rates.
- Other underpayment breaches included: casual loadings, penalty rates, overtime, clothing allowances and annual leave entitlements………..all under the fast food industry award 2010.
Judge Flick stated that “………….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. “
Justice Flick ordered the companies to display workplace notices detailing employee rights and entitlements and of concern to me, commission a workplace audit of its compliance with workplace laws within 28 days and report the results to the Fair Work Ombudsman. Why the latter concerns me is that in another article released today on the judgement by the Financial Review, the following statement was released by the Sushi Operators.
“The Chain said it had backpaid the majority of former staff and engaged an external accountant to conduct an audit to ensure compliance.”
Why is this a concern you ask?
Accountant’s are not qualified experts for the purpose of Fair Work Compliance and in short, the Sushi Chain operators have employed the wrong profession. The correct professions are qualified and experienced payroll professionals and Industrial Relations/Employment Relations professionals, whom should have an IR/ER degree, or a combined HR/IR ER degree. And for those asking….”why not a law degree?” here is the reason. Most Bachelors of Laws (LLB) have Employment Law and Industrial Relations as electives. Unless they have completed electives in these areas, they are not qualified. I’ll be doing another blog on who is and is not qualified when it comes to ER/IR, HR and Safety soon.
So if you do use an Employment Lawyer (which I do not recommend for the purposes of Payroll and effective preventative strategies, that is what HR/ER experts like myself and payroll experts are for) I recommend you do the following: If they have an LLB, ask for proof of them completing electives in Employment Law and IR. Alternatively, some state law societies such as Victoria and NSW have Employment Law Certifications, so ask to see this. Most full time and dedicated Employment Lawyers have a Masters of Employment Law, again check for this (if their LLB transcript isnt available). Lastly, dedicated Employment Lawyers generally stick to employment law. So if you get one who also advertises services for Commercial Law, Family Law etc, how do you know they are keeping up to date on employment law? It may well be that Commercial Law is 90% of their work.
I only recommend Employment Lawyers that are busy practicing Employment Law (so in court, or mediation), have a qualification or Certification in Employment Law/IR (Or Bachelors with these electives completed) or both. I also dont work with those that advertise too many mixed services including Commercial Law, Trusts, family law, with Employment Contracts, Policies and Procedures. And especially, if they also advertise “Safety risk assessments.” But I will write more on this at a later date.
The accounting professions mainstay is Tax Act Compliance, some also do Corporations Act and administer trusts. In addition to keeping up with this legislation, Accountants generally keep current on Accounting standards which include the treatment of financial statements such as the Balance Sheet and Cashflow statements. At least one in each practice will also have to maintain their Tax Agent status in order to both provide tax advice, and collect taxes on behalf of the Government.
A payroll professional focuses on both the Fair Work legislation (especially awards) and its automation via Payroll Systems, whom for industries that rely on shift rosters, requires a knowledge of shift rostering systems.
IR/ER degree qualified professionals primarily concern themselves with keeping up with all things Fair Work ranging from awards, underpayments, bullying, special protections, and dismissal. Keeping up on this knowledge alone can take up to 2 hours daily by reading up on all things Federal including: Federal Court Case outcomes, Fair Work Commission notices/updates etc, State Employment Tribunal, award and other determination reviews, FWA, NES, award updates, FWO advice, tool changes, investigations and prosecutions. And I havent even gotten to HRIS, HRIM and Strategic HR development.
I am going to make an analogy that may seem extreme, but I have been fixing FWA breaches for clients made by accountants and other unqualified and inexperienced professionals and managers for almost a decade now.
“If you get an accountant to do anything Fair Work related, this is no different to hiring a plumber to rebuild your car engine.”
Got it, super, lets move on.
Last year, over 50% of litigations by the FWO was against operators of Fast food, Restaurants and Cafes.
Consistent breaches in this sector include:
- Award coverage,
- Pay (hourly rate underpayment, which equated to 33% of all previous year FWO non-compliance activity),
- Failure to supply payslips (23% of all previous year non-compliance),
- Salary payments,
- Hours of work and
- Calculating leave.
Operators in these sectors must be vigilant when trading as the implications of not only acting on the wrong professional advice, but also not ensuring they have the appropriate technology to enable that advice and services, ultimately result in the owner of the business paying the price if they deliberately or accidently fail to comply with FWA legislation.
More information on this judgement from the FWO can be found here.
The Federal Court judgement can be found here.