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Norman Waterhouse

Directors pay penalties of over $10,000 for poor employment records

In the recent decision of Fair Work Ombudsman v A & K Property Services Pty Ltd & Ors [2019] FCCA 2259, the Federal Circuit Court of Australia was asked to consider whether the directors of a company should be held personally liable for penalties where the corporation is found to have contravened the Fair Work Act 2009 (Cth) (the Act). Specifically, alleged failure to issue payslips or keep records and underpayments under the Fast Food Industry Award 2010, affecting nine employees.

In this case commenced by the Fair Work Ombudsman (the FWO), there was a reverse onus of proof which required the employers to disprove underpayment allegations and failure to keep adequate time and wages records or issue pay slips.

Facts

A & K Property Services Pty Ltd (the Company) operates two sushi take away stores in Queensland. The directors of the Company were also respondents in the case and were considered responsible for ensuring the Company complied with its legal obligations under the Act and the Fair Work Regulations 2009 (Cth).

The Company admitted to the following contraventions over a three month period, failing to:

  • make and keep employee records;
  • provide pay slips within one working day of paying an amount to employees;
  • pay minimum rates of pay, weekend penalty rates, overtime and annual leave loading;
  • make superannuation contributions;
  • enter into written part-time agreements; and
  • accrue annual leave and personal/carer’s leave.

Mr Kim, one of the directors, admitted to being involved in the record keeping and pay slip contraventions. Additionally, each of the directors admitted to being involved in the accrual of leave contraventions.

Director Responsibilities

In meeting with FWO, the directors were unable to specify the start date of the affected employees and could not provide contemporaneous records to determine the quantum of entitlements owed to the employees.

A failure to make and keep records and provide the relevant employees with pay slips was considered by the Court to be a particularly serious contravention as it had the potential to frustrate the ability of the employees to understand their lawful minimum entitlements and hold the Company accountable.

The Court determined there was a need for general deterrence in this matter, particularly where the relevant industry has a real potential to lead to the exploitation of workers. While the Court accepted the Company and the directors’ conduct was not deliberate, it ‘was plainly grossly reckless.’

Reverse Onus of Proof

Section 557C of the Act required the Company to disprove the underpayment contraventions in the circumstances where no pay slips were given to the relevant employees and no records were made and kept. The FWO submitted to the Court that it was relevant to consider the admissions were made in the context of the FWO relying upon this reverse onus of proof.

However, early admissions by the Company and directors meant the reverse onus provisions were not tested in this case.

Decision

The Court ordered the Company to pay $108,000. Each director of the Company was held personally liable and ordered to pay penalties of up to $10,600, commensurate to their contraventions of the Act.

Take Home Messages

This case serves as a timely reminder to ensure you understand your responsibilities as a director. Where a corporation fails to make and keep records or provide pay slips, the onus is on the corporation and/or the directors to disprove any allegations of underpayments and poor record keeping.

The findings of this case highlights the need for employers, including the directors of a company, to ensure relevant award requirements are being met and appropriate records are maintained. Importantly, directors may be held personally liable for a contravention of the Act.

For more specific information on the information contained in this article please contact Lincoln Smith on +61 8 8210 1203 or lsmith@normans.com.au or Ganesh Krishnan on +61 8 8217 1395 or gkrishnan@normans.com.au.

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