The Fair Work Ombudsman is taking an increasingly aggressive approach in seeking to recover civil penalties from employers who have failed to pay their employees in accordance with the applicable Modern Award.
In the case of Fair Work Ombudsman v Mamak Pty Ltd [2016] FCCA 2104, Judge Smith of the Federal Circuit Court ordered Mamak, a popular Malaysian restaurant chain, to pay a civil penalty of $184,960 on top of compensation payments to employees. In addition, Mamak’s three directors were each ordered to pay amounts of around $36,000.
For many businesses and directors, such significant penalties would be financially crippling.
What lessons can employers learn from the decision?
Employee acquiescence is irrelevant
Judge Smith made clear that the fact that the employees had knowingly agreed to be underpaid did not detract from the seriousness of the contraventions. The fact that none of the employees complained about their rate of pay was equally irrelevant.
This reminds employers not to be complacent. It is important that all employers take active steps to audit their employment arrangements to make sure that they comply with the applicable Modern Award and the Fair Work Act 2009 (Cth).
Directors must be proactive
Judge Smith held that Mamak’s three directors were involved in the contraventions of the Modern Award and the Fair Work Act 2009 (Cth) on the basis that they were responsible for and authorised the employment arrangements that led to the contravention, and were aware of their obligations under the Award and the Act.
As I explained in Hiding behind corporate veil: Directors liable for breaches of the Fair Work Act, a director or manager can be exposed to a civil penalty for simply failing to act with knowledge that a contraventions is occurring. This suggests that all directors and managers need to take a proactive stance in managing and overseeing the wages and conditions of staff members.
Higher penalties in problem industries
Judge Smith suggested that employers who operate in problem industries may be exposed to higher penalties. This follows from the High Court’s confirmation of the deterrent purpose of civil penalty orders early last year. A significant civil penalty in a problem industry can have a potent deterrent effect.
Judge Smith’s reasoning should serve as a warning to employers in industries in which many businesses the industry adopt practices that involves the underpayment of staff.
How can JFM Law help?
JFM Law is experienced in carrying out comprehensive audits of the human resources practises of small to medium sized employers. We help our clients to minimise legal and reputational risk, and to restructure their workplace to ensure that they are compliant with all of the applicable rules and regulations. Contact JFM Law on (02) 9199 8597 for a no obligation chat. If you would rather get in contact through email, send your question through or by email at wehelp@jfmlaw.com.au.
The information contained in this post is current at the date of editing – 6 June 2024.
