Recently we have seen an increased focus on compliance with employment laws, both in terms of employers self-reporting breaches and regulatory authorities investigating and prosecuting underpayment claims.
In the past year, Queensland has amended the Criminal Code to introduce wage theft laws, and the Fair Work Commission has added significant requirements for the payment of annualised salaries to many employees covered by modern awards.
New wage theft laws have commenced
The Queensland Criminal Code now recognises ‘wage theft’ as stealing. Complaints about underpayment of hours, unpaid super, unreasonable deductions, unpaid penalty rates, misclassification of workers under a modern award or sham contracting can be made directly to the Queensland Police Service, which can investigate.
Employers who wilfully or deliberately underpay their employees may face a criminal penalty of up to 10 years’ imprisonment. Liability may extend beyond an individual employer or company to directors or
senior officers if they have been involved as an accessory (assisting or encouraging the commission of the offence).
While these laws are directed at deliberate conduct, rather than honest mistakes, we recommend that employers take steps to ensure that employees are classified properly under any applicable modern award and that they are meeting their obligations in respect of employee entitlements. We can help if you need advice on your obligations.
Plenty of red tape for annualised salary arrangements
Last year, the Fair Work Commission added new rules about annualised wage arrangements in a number of modern awards. For example, under the Horticulture and Pastoral Awards, by agreement, an employer can pay an annual wage in satisfaction of certain award entitlements. Importantly:
- the annual wage must be no less than the employee would receive if paid strictly in accordance with the relevant award;
- the arrangement must be recorded in writing, setting out the award provisions which are satisfied and the outer limit of ordinary hours to be worked; and
- if an employee works in excess of that outer limit, the award’s penalty/overtime rates apply.
There are also onerous requirements in relation to record-keeping and conducting reconciliations. In particular:
- the employer must conduct a reconciliation every 12 months against the amounts payable under the award and make a payment to the employee in respect of any shortfall; and
- the employer must keep a record (verified by the employee) of the employee’s starting and finishing times and breaks.
Other modern awards have been updated to include similar requirements. Unfortunately, for many employers, these requirements detract from the benefit of an annualised wage arrangement, which has historically offered administrative convenience.
That said, the Fair Work Commission has confirmed that annualised salary clauses are not intended to prevent an employer from paying an employee a salary under a common law contract, with the salary set at a level that satisfies the employee’s award entitlements. This requires a carefully drafted set-off clause and assumes a reasonable buffer to allow for variations between pay periods (given that award entitlements must still be satisfied each pay period).
If you would like advice on your modern award obligations or to know when and how to implement annualised wage arrangements, contact us to receive advice suited to your particular circumstances.
Big penalties for underpayments
An employee can make a complaint to the Fair Work Ombudsman, which can investigate alleged underpayments. Fair Work Inspectors have powers to enter premises and require production of documents during an investigation. Ultimately, the Ombudsman may commence proceedings against an employer and any individuals who are involved in an alleged contravention.
Employees can also make a claim for unpaid wages through the Queensland Industrial Magistrates Court, which is designed to be a quick and inexpensive process to recover unpaid entitlements within the previous six years.
In a recent case, the Federal Court imposed large financial penalties on a small retailer who underpaid eight employees about $21,000 over a nine-week period (representing 37-90% of wages owed). The employees were young, foreign nationals subject to visa conditions. The court found that the employer knew the employees were covered by the award yet paid them flat rates well below their minimum entitlements. The employer also failed to keep records and to provide payslips.
The Court found that the conduct was deliberate and systematic and imposed a penalty of $215,000 on the employer, and a further $41,000 on the sole director, who was responsible for the company’s overall direction, control, and management. These large penalties in context of much lower underpayment reflect the Court’s focus on deterrence.
We can help if you would like advice about your obligations or need assistance in relation to any action taken by the Fair Work Ombudsman.