Employers and human resources managers who comply with their record keeping and payment obligations can significantly reduce the risk of suffering crippling fines due to underpayment contraventions.
In Fair Work Ombudsman v NSH North Pty Ltd [2017] FCA 1301, a restaurant in Lake Macquarie was ordered to pay compensation of $128,309.95 and a civil penalty of $301,920 for underpayments and contraventions of record keeping obligations. In addition, its director was fined $54,672, its human resources manager was fined $21,760 and its store manager was fined $18,496. These fines were heavily discounted for cooperation with the Fair Work Ombudsman.
What record keeping obligations do employers have?
Employers are required to give each employee a pay slip at the end of each pay cycle. They are also required to keep a range of records about each of their employees. The records that must be kept are listed on the Fair Work Ombudsman website.
New provisions of the Fair Work Act (2009) expose employers who knowingly or recklessly keep false or misleading records such as pay slips, or give false or misleading information to the Fair Work Ombudsman to increased penalties. An employer could recklessly give misleading records if it gives records to the Fair Work Ombudsman knowing that there is a risk that its records were incomplete or omitted important information.
Employers can be fined significant amounts for record keeping contraventions alone. In Fair Work Ombudsman v Han Investments Pty Ltd [2017] FCA 623, a café chain in Perth was ordered to pay a civil penalty of $15,000 because it failed to keep records of the hours that its employees had worked, the penalty and overtime rates paid to its employees, and the annual leave taken and accrued by its employees. Its sole director was also ordered to pay a penalty of $2,500.
When will managers and directors be liable for a contravention?
A human resources manager or director will be personally liable for an underpayment or record keeping contravention if the employee proves the two things set out below.
- First, that the director or manager had actual knowledge of the essential factual elements which comprised the underpayment or contravention. Knowledge of the legal elements is not necessary.
- Secondly, that the director or manager did or omitted to do some act which implicated or involved him or her in, or is practically connected with, the contravention. This may be inferred from the degree of control that a director or manager exercises over the employer
Directors and managers cannot avoid liability by saying that they did not know that what they were doing is illegal. They cannot defend themselves by saying that they were taking reasonable steps to prevent contraventions.
How can employers prevent underpayment?
Although most employers would never deliberately underpay an employee, all employers make mistakes. It is very easy for an employer to accidentally underpay an employee. Employers can do a number of things to prevent inadvertent underpayment. We have set out some of those things below:
- Keeping comprehensive records about the wages paid to employees and the Modern Awards under which they are employed.
- Auditing all of their employment contracts on an ongoing basis to determine whether their existing employees are classified and paid at the right level under the relevant Modern Award.
- Monitoring changes in minimum wage rates by signing up to the Fair Work Ombudsman alert service.
- Conducting proper training with managers and accounts staff to ensure that they can monitor payment rates and award classifications.
- Conducting proper training with managers and accounts staff to ensure that they know how to deal with the Fair Work Ombudsman.
How can employers comply with their record keeping obligations?
Employers can do a number of things to ensure that proper and accurate records are kept. We have set out some of our best tips below:
- Developing a record keeping policy which clearly prescribes which records each manager has responsibility for keeping and ensuring the accuracy of.
- Developing standard form documents that are used for all employee records.
- Ensuring that managers have a policy of regularly following up employees who have not submitted reports and records on time.
- Having different managers conducting regular audits of the records kept by other managers to ensure that they are accurate and complete.
- Making record keeping an agenda item at each staff meeting.
How can we help you avoid underpayment contraventions?
Get in touch with us using the contact form below to discuss how we can help your business to get on the front foot with its human resources compliance.
The information contained in this post is current at the date of editing – 6 June 2024.