Blatant disregard for Award entitlements results in costly exercise for employer

In the decision of Supic v ASX31 Pty Ltd t/as Midnight Pharmacy [2020] SAET 199 (Decision), the South Australian Employment Court (the Court) exercised its power to impose penalties on ASX31 Pty Ltd t/as Midnight Pharmacy (the Employer) as deterrents for serious contraventions of the Fair Work Act 2009 (Cth) (the FW Act). The case serves to remind employers of the importance of maintaining rigorous mechanisms to ensure employees are not denied their legal entitlements, such as compounding interest opportunities through superannuation contributions.

Facts

Ms Supic first alerted Mr Angelos, the owner of the Employer, to missing superannuation contributions in 2014. She was reassured of a rectification, yet given no explanation as to why or how the issue arose. This absence of contributions continued through to September 2015, at which point Ms Supic grew concerned that her employment stability would be threatened if she pushed the matter further. In 2017, after some three years of employment, a total of $5.96 had been paid into her superannuation fund for her entire employment period.

Ms Supic resigned soon after, citing the unmet promises regarding superannuation. She utilised her sick leave for her remaining two weeks of employment due to ill health. Mr Angelos did not pay Ms Supic for this period, nor did he pay her accrued annual leave. To this extent, Ms Supic had been denied wages and leave entitlements totalling approximately four weeks of income.

In early 2017, Mr Angelos made a series of payments totalling $173,000 to the Australian Taxation Office (the ATO) in response to unpaid superannuation for other employees dating back to 2005. He claimed to have received advice that this sum was sufficient to cover all present and former employees’ missing superannuation entitlements through to 2018, including Ms Supic’s.

Ms Supic initially applied to the Court seeking payment of the unpaid entitlements and the imposition of pecuniary penalties against the Employer for various contraventions of the FW Act. After the application was filed, the Employer paid the claimed unpaid wages and entitlements in full, but not any superannuation contributions.

Decision

At the hearing, Mr Angelos submitted that the ATO failed to communicate with him regarding the distribution of the payments, and that the ATO failed to adequately communicate with him for 15 years. However, he and his accountants consistently failed to ever investigate further into why there were defaults in any employee’s superannuation payments. Mr Angelos raised further arguments in response to the remaining unpaid wages and leave entitlements that ultimately were not pursued. The Court noted that such arguments were contrary to documentary evidence.

The Court aligned heavily with Ms Supic’s submissions. She had suffered a significant disadvantage by being denied interest accrual and investment return opportunities over six years. The weight of evidence supported that the Employer failed to cooperate, diligently investigate and explain the various contraventions of the FW Act, namely, the failure to pay superannuation, leave entitlements and wages. In light of the ‘long history of defaults’, the Court suggested that remedial payments may have never been made had Ms Supic not legally pursued them.

The Court did not accept that Mr Angelos held a genuine, informed belief that the contraventions would be rectified through the series of payments to the ATO beginning in 2015. Rather, he had ‘very little regard’ for Ms Supic’s lack of superannuation contributions and her ‘years of lost investment returns’, both of which notably personally benefitted Mr Angelos and his business.

Given that the $173,000 worth of payments to the ATO did not cover his employees’ collective superannuation defaults past 2013, the Court held that it should have been obvious to Mr Angelos that his business was not in fact meeting its legal obligations, yet he failed to undertake any investigation upon awareness of this inconsistency. The Employer’s arguments suggesting responsibility rested upon the ATO were held to be unfounded.

The Court emphasised the deterrent effect its penalties can have against non-compliance of employee entitlements. A total of $32,250 was ordered to be paid to Ms Supic as follows:

• $21,000 for failure to ‘make Award based superannuation contributions’;
• $5,000 for deliberate refusal to pay two weeks’ worth of the applicant’s wages;
• $4,000 for deliberate refusal to pay accrued personal leave;
• $2,000 for deliberate refusal to pay out accrued annual leave; and
• $250 for failing to pay a relevant public holiday loading.

Take Home Messages

The present case is an example of blatant disregard for an employee’s well-founded concerns. Ms Supic first trusted in her Employer’s promise to remedy her lack of superannuation contributions, then tolerated its continued default for some time due to fears of Mr Angelos’ retaliation. As discussed by the Court, she did so until she was forced to pursue her rights through costly, stressful court proceedings.

Employers are therefore reminded to facilitate an environment in which employees can raise concerns regarding their legal entitlements. Errors must be thoroughly investigated as soon as they become known and both communications about, and rectification of, such issues must be prompt. It is further imperative that employers remain up to date with employee rights under relevant Awards. We note for our Local Government clients, while this case refers to the Federal FW Act, the lessons are still applicable.

For more information please contact Sathish Dasan on +61 8 8210 1253 or sdasan@normans.com.au or Ganesh Krishnan on +61 8 8217 1395 or gkrishnan@normans.com.au or Anastasia Gravas on +61 8 8217 1331 or agravas@normans.com.au.