Tough Penalties For Underpaying Employees

Legislation has passed Federal Parliament greatly increasing penalties for employers who underpay employees.

The Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 increases penalties for systematic underpayment of employees ten-fold and doubles penalties for record-keeping and payslip breaches.

The Fair Work Ombudsman said that under the changes a court could impose higher penalties where an employer knew they were breaching their obligations and this conduct is part of a systematic pattern of behaviour.

In such cases maximum penalties of $630,000 and $126,000 per contravention could apply to corporations and individuals respectively.

The new laws will double the maximum penalties for record-keeping and pay slip breaches, to $12,600 per contravention for individuals and $63,000 for companies, and triple existing penalties in cases where employers give false or misleading pay slips to workers, or provide the Fair Work Ombudsman (FWO) with false information or documents.

FWO noted that last financial year, two-thirds of its court cases involved alleged record-keeping or payslip contraventions with nearly one-third involving allegations of false or misleading records being provided to the FWO.

The new laws apply from the day after the Bill receives royal assent, except for the new franchisor and holding company liability which will start six weeks later. (The Bill received assent on 14 September.)

The Fair Work Ombudsman Natalie James said, “The new law will hold certain franchisors and holding companies responsible for underpayments by their franchisees where they knew, or reasonably should have known, about the contraventions and failed to take reasonable steps to prevent them.

“The laws will apply to franchisors that have a significant degree of influence or control over the franchisee’s affairs.”

Ms James said that amendments moved by the Senate will also provide that where an employer has not met their record-keeping or pay slip obligations, the employer will have to disprove a wage claim put before a Court unless the employer has a reasonable excuse for not keeping records or issuing pay slips.

Ms James also welcomed the strengthening of laws governing “cashback” arrangements with the legislation specifically prohibiting unreasonable requirements for an employee to pay money to their employer or another person. These protections will now also extend to prospective employees unreasonably required to pay their own money to get a job.