By Matthew Robinson and Ceri Hohner

Legislation introduced to protect vulnerable workers was tested in the Federal Circuit Court of Australia (FCC) in a case against A & K Property Services Pty Ltd (the Company). Two sushi outlets in Queensland were fined a total of $125,700 for failing to keep proper records and underpaying nine workers by $27,000 over a three-month period.

Reverse onus of proof

To deal with the exploitation of vulnerable workers, higher penalties were introduced for serious contraventions within the Fair Work Act 2009, and record-keeping failures. These include a tenfold increase in the maximum penalty, and a penalty payment of approximately $126,000 for an individual and up to $630,000 for a corporation.

Section 557C of the Fair Work Act 2009 was introduced along with these changes and prescribes what’s known as ‘a reverse onus of proof’. This means that it’s up to the employer to prove that employees were paid correctly and provided with the right entitlements in circumstances where the employer hasn’t kept compliant records or made such records available to their employees.

Fair Work Ombudsman v A & K Property Services Pty Ltd & Ors [2019] FCCA 2259

This case was the first to use the reverse onus of proof provision and resulted in substantial fines for both the Company and the individual directors.

The case outlined that when an employer fails to keep compliant records, employees have no knowledge upon which to base the payments made to them. Employees are unable to determine what their correct entitlements are and whether these have been paid. Further, when assessing the amount owed for the purposes of the underpayment claim, the Fair work Ombudsman (FWO) had to rely on non-contemporaneous records created by the respondents.

While the conduct was not deemed ‘deliberate’, it was found by the Judge to be ‘grossly reckless’. The Company, however, was found to have cooperated throughout the FWO investigation, saving time and resources by not going through a fully contested hearing.

By accepting the FWO’s submissions, and the finding that the directors appeared contrite, the court applied a 25% discount to the maximum penalties for the directors. All outstanding wages and superannuation had also been paid by the Company. 

Penalties

Judge Michael Jarrett of the FCC ordered the Company to pay $108,000. It was further found that the three directors of the Company were involved in failing to pay leave entitlements, and one director was involved in breaches of record-keeping and compliant pay slips. One director was penalised $10,600 and the subsequent two directors were penalised $3,550 each. This was a total of $125,700 in penalties for the breaches.

What does this mean for you, as an employer?

You must remain vigilant in your extensive record-keeping obligations, and need to make sure you know:

  • What records you need to keep;
  • The precise way in which these records should be kept;
  • The rights of employees and FWO inspectors to have access to such records; and
  • How long the records need to be kept.

Matthew Robinson is a partner and solicitor with FCB Workplace Law who has been advising clients on employment natters for over 15 years.

Ceri Hohner is an associate and solicitor at FCB Workplace Law who has assisted clients across Australia from a range of industries and businesses.