Issue 92 – Leigh’s Corner – Article No.40

Joshua Easton

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Leigh’s Corner

Article Number 40


Because of the increase in the major cases coming through the Courts and Tribunals in relation to these matters we have raised this issue again.

The number of companies found to have been deliberately underpaying staff through either deliberate deception, invalid agreements or contracts or ignorance
is increasing.

Some of the recent cases involving 7 Eleven, Myer, Balada Group, Pizza Hut, Woolworths, Hungry Jacks and KFC involve large amounts of money and proportionally
large back payments to staff and financial penalties to be paid by the employers.

There have been other significant cases of a similar nature in the security, cleaning and hospitality industries.

In October 2017, the Federal Government introduced the Vulnerable Persons Act 2017 which introduces the following legislation to combat deliberate
underpayment of wages and sham contracts:

The main changes will be:

§The introduction of a higher scale of penalties (up to 10 times the current amount up to $600,000) for a new category
of ‘serious contraventions’ of prescribed workplace laws

§To prohibit employers from unreasonably requiring employees to make payments (i.e. ‘cash-back’ arrangements or threats to cancel visa arrangements
or termination of employment)

§To strengthen the evidence-gathering powers of the Fair Work Ombudsman (FWO) to ensure that the exploitation of vulnerable workers can be properly
investigated, and

§To introduce stronger provisions to make franchisors and holding companies responsible for breaches of the Fair Work Act where they deliberately set
out to contravene or avoid paying the correct wages and penalty rates to employees

The Office of the Fair Work Ombudsman will have increased powers in relation to the gathering of evidence and compliance under these laws.

If an official investigation into an employer’s payment of wages and conditions commences the onus of proof under these new laws will be on the employer,
which means the innocent until proven guilty rule will no longer apply in these cases.

The employer must prove that the correct payments are being made to employees and failure to keep proper payslips or appropriate electronic records
may result in significant fines and possible back payments to staff.

If you are paying employees an all-purpose hourly rate which is supposed to compensate for overtime and penalty rates contained in the applicable Modern
Award, it is good practice to check these rates and ensure that they indeed do compensate adequately for all the penalty provisions that may apply.

The test used by the Fair Work Ombudsman and the Fair Work Commission is the Better Off Overall Test or BOOT.

This test is used to determine what rates of pay and applicable penalty provisions would apply to an employee under the relevant Modern Award and compares
these rates to the all-purpose rates being paid to ensure that the employee is better off than they would have been under the award provisions.

The Fair Work Ombudsman has a wage calculator which can be found on their website at
this calculator is very useful for determining employees’ wages and penalty rates.

Unless contained in a suitable employment contract, then these conditions for an employee who would normally be covered by an award should be contained
in a registered Enterprise Agreement or an Individual Flexibility Agreement under the Flexibility Clause of the relevant Modern Award.

Failure to correctly calculate these amounts can mean a breach of the Federal legislation and can be very costly.

Some claims of Adverse Action or General Protections are surfacing in relation to these claims by employees and these claims are notoriously difficult
to manage and can be expensive to finalise.

With the current pressure being applied by unions and employees on employers in relation to wage increases and a greater level of scrutiny by the governing
bodies a review of wages, contracts and general compliance is a prudent action.


Please note that this is general advice for information only and any application of legislation and/or Industrial Relations or contractual requirements may require professional advice to suit your individual circumstances.

If you have question for Leigh’s team send us an email ……. [email protected]