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FWO secures $2 million in back-payments from mining employer

On 9 June 2016, the FWO confirmed the securing of an Enforceable Undertaking with a Victorian based mining employer.

The Undertaking sets out that since August 2015, the mining services company has been the subject of 11 requests for assistance to the FWO “relating to allegations of underpayment of wages, penalty rates and shift allowances”.

During the FWO’s investigations of these requests, the company admitted to underpaying staff and breaching the Fair Work Act and the relevant Awards in the process.  In its statement, the FWO says that the employer “underpaid 205 employees a total of $2.09 million for work they performed at mines in regional Victoria and Queensland between 2010 and 2014.”

Of those 205 employees the Enforceable Undertaking notes that 5 were owed more than $50,000, while more than 30 were owed more than $20,000 and nearly 100 employees were owed more than $5,000. The underpayments largely related to a failure to pay nightshift penalties to certain Victorian employees and penalty rates to Queensland employees.  There was also a failure to pay a relevant industry allowance.

The FWO’s statement notes that “The Company blamed the underpayments on its failure to properly understand the arrangements for transitioning to modern Awards, erroneous legal and accounting advice and challenges associated with its expanding workforce”.

Fair Work Ombudsman Natalie James confirmed the employer had co-operated during the FWO’s investigation and had admitted its contraventions. At the time the statement and Undertaking were released, the company had repaid more than $1 million to ongoing employees and had committed to repaying previous employees by March 2017.  There was also agreement that the employer would pay 1.5% interest on all back-payments.

In addition to the back-payments, the mining company is now bound to a number of other undertakings by operation of the agreed Enforceable Undertaking, namely that it has agreed to:

  • “Donate $15,000 to the Loddon Campaspe Community Legal Centre in regional Victoria;
  • Engage an independent specialist to audit its compliance with wages and work-related entitlements and record-keeping and pay-slip obligations;
  • Set up a dedicated email address for employees with inquiries about underpayments;
  • Apologise to all underpaid employees;
  • Display a workplace notice and a media notice in Melbourne’s Herald Sun newspaper detailing the contraventions, the terms of the EU and apologising for its actions;
  • Register with the Fair Work Ombudsman’s My Account portal;
  • Upgrade systems and processes to ensure future compliance with workplace laws; and
  • Commission workplace relations training for all managerial staff with human resource and payroll responsibilities.”

Ms James highlighted this matter as a reminder to employers that:

“Underpayments of minimum entitlements, left unchecked over time, can lead to employers facing big back-payment bills they were not budgeting for.”

She also noted that the use of Enforceable Undertaking’s by the FWO was achieving ‘strong outcomes’:

“We use EU’s where we have formed a view that a breach of law has occurred, but where the employer has acknowledged this, accepted responsibility and agreed to co-operate and fix the problem.”

Lessons for Employers

This case simply demonstrates the financial implications of misinterpreting or misapplying relevant industrial instruments to your employees. Such misinterpretations or misapplications can lead to investigations by the FWO and potentially prosecutions and enforceable undertaking negotiations, not to mention exorbitant back-payment orders.  Where you fail to comply with relevant Awards or the Fair Work Act, then civil penalties of up to $54,000 per offence for corporations can also be applied.

Reminder: National Minimum Wage Increase from 1 July 2016

On 31 May 2016, the Full Bench of the Fair Work Commission determined to increase the National Minimum Wage by 2.4%. In its reading of the decision, the Full Bench noted that there was generally a positive outlook in terms of the Australian economy, and that whilst the increase should not result in ‘inflationary pressure’ or impact on employment levels, this wage increase represented an opportunity to help those low paid employees in Australia.

The effect of the increase will mean that the National Minimum Wage will increase by $15.80, from the current $656.90 to $672.70 ($17.70 per hour).

The increase will take effect from 1 July 2016. The Full Bench also stated that the same increase of 2.4% will be applied to the minimum rates in each Modern Award.

Employers should ensure that where the Modern Award rate is being paid, the increase is passed on to their Award-covered employees from 1 July 2016. It is also essential that Employers review current pay rates for employees currently receiving over-Award payments, or engaged under Enterprise Agreements, to ensure that they do not underpay their employees when compared against the revised award rates, and/or continue to comply with the remuneration provisions of the Enterprise Agreement.

Aitken Legal can be contacted for any enquiry about the wage increase as it affects Modern Awards or Enterprise Agreements.

Chris Campbell, Partner

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