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It Pays to be Cooperative with the Workplace Ombudsman

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“No less than large corporate employers, small businesses have an obligation to meet minimum employment standards, and their employees, rightly have an expectation that this will occur. When it does not it will, normally be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction must be imposed at a meaningful level”. (Judge Tracey in the Federal Court decision of Kelly v Fitzpatrick).

The Commonwealth Government is reaping rewards from prosecuting small businesses for underpaid wages and entitlements. As advised in a previous newsletter, over the past 2 years, the Workplace Ombudsman has recovered more than $52 million in employee wage underpayments. The majority of these recoveries resulted in penalties payable to the Commonwealth, usually in tens of thousands of dollars. Interestingly, it is not necessarily the quantum of the underpayment which will determine the size of the penalty, as the Courts will have regard to a number of factors including:

  • The circumstances of the conduct;
  • The size of the business;
  • Whether the conduct was deliberate;
  • Whether the employer took corrective preventative action;
  • Whether the employer cooperated with the enforcement authorities; and
  • The need for specific and general deterrence.

In two contrasting cases, one small business (a trucking business) incurred penalties of approximately $3,500 for underpayments totalling in excess of $95,000, whilst the other small business (a beautician business) incurred penalties of approximately $27,500 for underpayments totalling less of $6,000. It was held that neither employer had acted deliberately. One was contrite and cooperated with the Workplace Ombudsman, whilst the other only paid after proceedings had been instituted. No prizes for guessing which employer cooperated.

In recent times the Workplace Ombudsman has been specifically targeting retailers. Should you receive a letter or a visit from the Workplace Ombudsman, it is advisable to be fully cooperative and to seek advice from MST as to any allegations of underpayment. Prevention, however, is obviously a better alternative to defending such allegations. If you pay wages and other entitlements which could be less than those prescribed by awards, the best preventative measure is to implement a collective agreement.

Author: Charles Cody