Aitken Workplace Forum
Common excuses given by businesses –
getting it right before a complaint is made
Nicholas Wilson 1
with Rebecca Price and Lauren Mathes 2
22 February 2013
INTRODUCTION
1. I begin by respectfully acknowledging the traditional owners of the land on which we
meet today, and pay my respects to elders both past and present.
2. I would like to thank Aitken Legal for the opportunity to address this conference. I
firmly believe that events such as these facilitate a cooperative approach to
workplace relations that from which everyone can benefit.
3. I record that the views expressed are my own and do not necessarily reflect
Government policy, and I take responsibility for any errors in the text.
1
Fair Work Ombudsman
2
Assistant Director, Education and Senior Education Officer
1
4. I also wish to acknowledge the Fair Work Ombudsman institutes proceedings in the
Federal Magistrates’ Court and Federal Magistrate Whelan, who you heard from
earlier today, is one of the judicial officers who hears those cases. Nothing said today
will involve a matter that is before Federal Magistrate Whelan and nothing in this
presentation is intended to influence Her Honour in any way.
5. I have been invited here today to discuss some of the more common excuses
provided by employers to my agency about why they aren’t meeting all of their
lawful obligations, and will get to that task in a moment.
6. Firstly, I recognise that running a business is hard work; whether you are an owner,
or a manager, or both. There are many competing demands for your time and
attention, and the demand to keep costs as low as they can be, while revenue
increases, is an ongoing challenge.
7. I recognise that, if you are a business owner, you are probably running your business
not just because it’s an income, but because you are passionate about what your
business does. You’re probably passionate about your customers and how you can
meet their needs. I recognise that many times you may not want the large boots of a
regulator wandering through your business. And I recognise that mostly you will want
to work with and employ staff around you who are similarly passionate about what
they do; staff who can grow your business. I recognise that, as an employer, you see
employment as more than a financial transaction – you are helping to grow your
employee’s skills and, you might be giving a bit back to your industry or community
by employing apprentices or young people.
2
WE’RE ABOUT BALANCE
8. The work I do is about balance in the relationships at work. The Fair Work system I
am part of stems from over a century of debate about working conditions and the
best way to regulate the workplace.
9. You might have heard of the 1907 Harvester Judgement that started the path to the
award system, with its decision to set a wage that “must be enough to support the
wage earner in reasonable and frugal comfort”3.
10. Less well known is the connection that Waltzing Matilda might have with the reasons
Australia became so concerned to moderate the excesses of disputation. There is a
fascinating story that the swagman who jumped into the billabong might well be a
striker on the run from some earlier violence associated with the strike4 and this
connects with the views that emerged around the time of Federation that the
excesses of disputation and unequal bargaining needed to be curbed.
3
Ex parte H v McKay (‘the Harvester Case’) (1907) 2 CAR 1, 4 (Higgins J)
4
In 1894, there was a major shearing strike, which started because the workers thought the land-owners were going to cut
their wages by around 10%. “During the strike eight shearing sheds were burnt in one district of Queensland, including the
woolshed at Dagworth. On 2 September about a dozen armed men crept up to Dagworth woolshed, which was defended by
station hands. They opened fire and the station hands shot back. Over 100 shots were fired but no-one was hit. During the
fighting one of the shearers crept up and threw a bottle of kerosene at the shed, and it burnt to the ground. Later that
month a swagman and shearer who had taken part in the dispute was found dead at a camp by the Four Mile Billabong
near Kynuna. This was Samuel ‘Frenchy’ Hoffmeister, whose body was recovered from the billabong. He had been shot.
Hoffmeister was suspected of lighting the match that burnt down the Dagworth woolshed, owned by the Macpherson
family. Some believe that he was murdered because of it, others that he shot himself.” There is credibility to the story that
these events were in Banjo Patterson’s mind when he wrote Waltzing Matilda (Patterson had visited the station and knew
the owners);
“Up jumped the swagman and sprang into the billabong,
‘You’ll never take me alive’, said he,
And his ghost may be heard as you pass by that billabong,
‘You’ll come a-Waltzing Matilda, with me’.”
from R. Hamilton, Waltzing Matilda and the Sunshine Harvester Factory, Fair Work Australia, 2011, pp10-12
3
11. Totemic values like this are at the core of what is now the Fair Work system. The
layered and sophisticated Modern Award system is a direct descendant of Harvester;
and the abhorrence of excessive, and potentially violent, disputation remains a core
value of our current legislation.
12. The same value of interposing principles of fairness between the decisions of
employers and employees has led us to penalty rates for working at unsocial times or
on days which take us away from our families and has led to the modern day
development of unfair dismissal laws.
13. These principles of fair treatment and of balance are at the very core of our
workplace relations system, and are worth remembering when modern day debates
rage about our industrial relation system. Justice Higgins himself said this in 1907
about an objective of pay uniformity (in connection with payment of an excise duty)
– “… the remuneration of the employee is not made to depend on the profits of the
employer. If the profits are nil, the fair and reasonable remuneration must be paid;
and if the profits are 100 per cent., it must be paid.” 5
14. Consider these two examples, taken from material published by the Department of
Education, Employment and Workplace Relations, which illustrate how some features
of our current system connect with the fairness objective.
a. Average weekly earnings are more than double the minimum weekly wage;
i. the weekly minimum wage is $606 ($31,533 per year);
5
Ex parte H v McKay (‘the Harvester Case’) (1907) 2 CAR 1, 5 (Higgins J)
4
ii. the weekly average wage inclusive of penalty rates in the retail
industry is $985 per week ($51,251 pa), and $969 per week ($50,435
pa), (respectively 1.62 and 1.6 times greater than the minimum); and
iii. the weekly full time average adult total earnings for all industries is
$1,413 per week ($73,481 pa) (2.3 times greater than the minimum).6
b. Despite the views that penalty rates in the restaurant industry have moved
upward recently as part of the award modernisation process, most have
remained the same; some have reduced; and only a few have increased
(noting that what happens will depend on the legacy State award applying to
the employer, as well as the provisions of the Modern Award).7
15. While plainly it is legitimate to question these things and to debate whether they
remain relevant, the debates themselves are not new, and I would encourage you to
recall why we have the features we do.
THE FAIR WORK SYSTEM, AND THE ROLE OF THE FAIR WORK OMBUDSMAN
16. The Fair Work Commission and the Fair Work Ombudsman was established on 1 July
2009 under the Fair Work Act. The FW Act introduced significant legislative changes
that deal with a number of important areas, such as:
a. the introduction of new good faith requirements for workplace bargaining
6
My summary of information in Submission to the Senate Standing Committee on Education, Employment and Workplace
Relations Inquiry into Fair Work Amendment (Small Business – Penalty Rates Exemption) Bill 2012, Department of
Education, Employment and Workplace Relations, 2013, p9
7
DEEWR, p19
5
b. the consolidation of thousands of state and federal awards into 122 modern
awards
c. the ten National Employment Standards, which provide a minimum safety net
for all employees.8
17. The FW Act also significantly expanded the traditional jurisdiction of our predecessor
agencies, beyond the enforcement of minimum wages and conditions and towards
investigating and litigating claims of unlawful discrimination that result in adverse
action being taken against an employee. From January 2010, national system
coverage was further expanded when four states (New South Wales, Queensland,
South Australia and Tasmania) referred their unincorporated business sectors to be
within Commonwealth coverage, meaning we now operate under a truly national
workplace relations system.9
The Fair Work Commission
18. The Fair Work Commission is the national workplace relations tribunal. It is an
independent body with power to carry out a range of functions including:

providing a safety net of minimum conditions, including minimum wages, in
awards

facilitating good faith bargaining and the making of enterprise agreements

granting remedies for unfair dismissal
8
Fair Work Act 2009 (Cth) ss 124-125.
9
With some exceptions, including non-constitutional corporations in Western Australia and some local public sectors.
6

regulating the taking of industrial action

resolving a range of collective and individual workplace disputes through
conciliation, mediation and in some cases arbitration

functions in connection with workplace determinations, equal remuneration,
transfer of business, general workplace protections, right of entry and stand
down.10
The Fair Work Ombudsman
19. At its core, the role of the Fair Work Ombudsman is to promote harmonious,
productive and cooperative workplace relations and ensure compliance with
Commonwealth workplace laws11. Our vision is to create fairer Australian workplaces
and, working toward this, we advise; we assist; we educate; and we ensure
compliance. My agency’s mandate is to build awareness and understanding of the
Australian workplace relations system and help employers and employees get the
information they need to work productively and harmoniously. I recognise that the
greatest public good is for Australians to be aware of their rights and obligations, and
we work hard to instil the community’s confidence in these being accessible. We
want to help businesses to understand and meet their obligations and manage
common disputes, and ultimately eliminate the types of common excuses we see
leading to us getting involved.
10
Fair Work Commission, http://www.fwc.gov.au/index.cfm?pagename=aboutrole
11
Fair Work Act 2009 (Cth) s 682(1)
7
20. The Fair Work Ombudsman estimates its reach is to around 600,000 employees and
more than 300,000 employers. Our primary points of contact are to our website,
www.fairwork.gov.au, and the Fair Work Infoline (tel 13 13 94). Fair Work Inspectors
last year completed 28,412 complaints (mostly underpaid wages) and 6,547 audits,
and recovered more than $39m in underpaid wages for 18,497 employees. 12
21. The nature of our work is to see problems and, worse, to see those problems
repeated. It is fair to say that not everyone has the information they need to comply
with the law. Some have all the information they’re ever going to get, but don’t share
the values I’ve referred to; and some even see the risk of a run-in with the Fair Work
Ombudsman or a union over a breach as just as another cost of doing business.
OPTING OUT
22. Mostly, I have an optimistic view of workplaces and I believe – and experience tells
me – that most employees are paid well and that most employers want to pay them
properly. For a start, you wouldn’t get full time average adult total earnings of more
than $73,000 a year with mass avoidance. Perhaps, more compelling as evidence, is
our own audit data, which consistently shows compliance rates of between 70% and
80% - and the story beneath the headline figure is that wages non-compliance is
often only a portion of the total. Of course, I know there is non-compliance, and
serious at that; and of course, the bad boss’ belief that a dollar is better in their
pocket than in their employee’s has detrimental economic and social affects both for
the employee personally, as well as our society as a whole.
12
Annual Report 2011-12, Fair Work Ombudsman, pv
8
23. Mostly though, in my optimistic vein, the system does work; as does the combination
of strong Government operated system to recover underpaid wages through
investigations and audits together with firm consequences for avoiders. I disagree
with the proposition that there is large-scale opting out of Australia’s minimum wage
obligations, since that is not consistent with the evidence we see, and I reject the
proposition that the Fair Work Ombudsman is somehow drowning in the complaints
and inquiries it receives.
24. On the other hand, in my other persona as a serial and hardened pessimist, I see
excuses offered by those who want to opt out.
Excuse number one – ‘I can’t afford to pay every entitlement’
25. Regrettably, some of the underpayments seen are a result of a conscious decision by
an employer to pay an employee less than the minimum rate. “I can’t afford to pay
every entitlement” is a short-term view that can have long-term financial
consequences. Many of you may have seen the series of articles published by Fairfax
Media over the Australia Day long weekend last month as part of its Off the Menu
campaign.
26. The series profiled allegations and cases of deliberate and inadvertent
underpayments, unsafe working environments, tax avoidance and bullying; naming
and shaming neighbourhood restaurants as well as major franchise chains. This
campaign displayed the considerable back payment bills these businesses are often
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hit with, and showed clearly the potential fallout that can occur when a business
doesn’t make the right choices.13
27. The conscious decision by a duty holder to underpay their employees is taken
seriously by my office, and by the Courts. In 2012, a Melbourne business operator
and his company were fined a total of $78,000 and ordered to back-pay four
employees a total of almost $11,000 after the court found the underpayments were
deliberate, persistent and repeated.14 The Federal Magistrate said that it was
‘important to bring home to any other employers who are experiencing the sort of cashflow problems described by the respondents that they nonetheless do not evade their
responsibilities.’
28. He went on to say that it:
‘is not properly open to an employer simply to avoid or evade their obligations under
Workplace Relations law simply because they are struggling’.15
29. Being naive about, or deliberately disregarding your employer obligations can have a
significant impact on your finances when the back pay is asked of you, either by your
employees, by my office, or by the courts.
30. While an employer might say they can’t afford to pay workers their correct
entitlements, they probably don’t understand they cannot afford to underpay.
13
See for example Sun Herald, ‘Wages rot begins at the top’, 27 January 2013, and Sunday Examiner, ‘Eateries serving up wage inequality’,
27 January 2013.
14
Fair Work Ombudsman v Promoting U Pty Ltd & Anor [2012] FMCA 58.
15
Fair Work Ombudsman v Promoting U Pty Ltd & Anor [2012] FMCA 58, [49].
10
31. Of course, in many cases, the cost of wages is the most significant cost of running a
business, particular for many small business operators. If cash flow is a problem for
you, you may need to look at your business and staffing structures and get some
professional advice about the best way forward. A good understanding of the
minimum rates, penalties and other conditions will help you make informed
decisions about staffing levels, rostering and operating hours. Remember,
understanding your obligations is not just about complying with the law; it should be
an important component of your business planning.
32. Such short-changing of staff isn’t a wise solution to cash flow problems, and can
create distortions in to your genuine profit position. Not only will you owe the staff
back pay, you are also opening yourself up to potentially significant penalties and
legal costs. The maximum penalty for each contravention of the FW Act is now
$51,000 for a corporation. Add to this the reputational cost to the business of
litigation, and the fact that you are unlikely to retain valued staff members if you do
not treat them with respect, the cost of paying correctly can soon be more attractive
than the cost of non-compliance.
33. When legal proceedings commence are commenced, we always inform the
community of the action through a media release, in a way that is done by many
other Federal and State regulators. We do this to ensure transparency of our actions,
and also because the litigation process is an importance deterrent for the community
on the consequences of non-compliance.
34. Ultimately, an employer’s best protection to avoid being named in a media release is
to not be a party to a litigation in the first place. Aside from avoiding the problem in
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the first place, a duty-holder worried about litigation by the Fair Work Ombudsman
can take heart from the fact that every case for considered for litigation has multiple
opportunities for non-litigation resolution before Court action is commenced.
35. As I will discuss shortly, we litigate sparingly, and very rarely where a duty holder has
corrected an underpayment or acknowledged that they were acting in breach of their
obligations.
Excuse number two – ‘That’s all they’re worth’
36. Another excuse we receive all too often is that that the employee “isn’t worth the
wage” they are supposed to be receiving. This is often heard when an employer
thinks the employee isn’t doing a good job or lacks experience, particularly when
they are new. Regardless of the real or perceived competency of the employee, you
have to pay them at least the minimum rate prescribed for their job at all times.
There are two cases which highlight the folly of this excuse:
a. Haig Brown Industries Pty Ltd – Litigation commenced in 2012 in the Federal
Magistrates Court against the company and its Director, which formerly
operated a metal work factory located in Moorabbin.16 This was a matter
involving a mildly disabled, but capable worker, whom the employer treated
and paid as an employee with a disability without obtaining the necessary
permission to do so through the Supported Wage System. There were
significant underpayments on the basis that the employer paid the employee
what they believed he was worth, not what he was entitled to under the
16
Fair Work Ombudsman v Haig Brown Industries and Neil Haig Brown, (Unreported, Federal Magistrates Court, FM Riley (ex tempore),
MLG94/2012, 28 August 2012)
12
relevant award classification for the duties he performed. The court ordered
the employer to pay $13 274.31 as well as $611.00 interest to the employee,
with penalties totalling $10 500.
b. Top Value International Pty Ltd – Litigation commenced in 2011 in the Federal
Magistrates Court against the company, its director and the director’s wife,
who was a shareholder in the company and was involved in running the
business..17 Top Value International operated a business (since sold), that
imported and wholesaled gift and home ware throughout Australia. In this
case, the long standing employee, who was engaged in store worker duties,
was paid on the basis of what the employer believed that he was worth, not
what he was legally entitled to. As a consequence, the Court ordered the
company to back pay the employee $63 939, plus $6,340 in interest, with
penalties for the company and its operators totalling $52 800 being handed
down last month.18
37. These matters highlight the costly under-assessment of an employee’s worth and
demonstrate the importance of understanding your relevant award obligations,
particularly of identifying the correct classification for each employee and of
observing correct methods for determining genuine supported wage assessments.19
17
Fair Work Ombudsman v Top Value International Pty Ltd and Others [2013] FMCA 41
18
Fair Work Ombudsman v Top Value International Pty Ltd and Others [2013] FMCA 41, [8]
19
The Supported Wage System aims to increase employment opportunities for people with disability by providing an industrial relations
framework that enables the legal payment of an independently assessed productivity-based, or pro-rata wage. To apply to participate in
the Supported Wage System, an employer or disability employment service provider can complete and submit an application form on the
JobAccess website. DEEWR will confirm the applicant’s eligibility. For more information on the program, employers or workers can visit
jobaccess.gov.au or phone their state’s supported wage management unit on 1800 065 123.
13
38. For new or inexperienced employees, some awards provide an introductory
classification to apply while they get up to speed. If this applies in your award and
you utilise these classifications, make sure that they are actually relevant to the
employee concerned, and check how long an employee is able to stay at that level –
many will be for a restricted timeframe or until a particular competency is gained.
Failing to increase the rate once the introductory period is over can lead to very large
underpayments. This is illustrated by a matter was heard in the Federal Magistrates
Court involving a Hungry Jacks store in Bendigo.20 The employer had an enterprise
agreement with an introductory classification. The agreement required employees to
be upgraded to a higher classification once they had been employed for a certain
period, but the employer failed to reclassify the employees accordingly. This lead to
an underpayment of approximately $105 000, and a fine of over $46 000.
39. If you think an employee is not worth the minimum wage they are entitled to
because of their performance in the job, you need to examine the reasons for the
underperformance and the steps you could take to address them. As a manager
myself, I recognise that employment problems can and do occur. Managing
performance is a skill that all of us as leaders and business owners need to practice.
Consideration will usually need to be given to a wide range of contributing factors,
not least our own performance as managers, role models and coaches.
40. Consider whether you have inducted and trained the underperforming employee
appropriately. Whether you been clear about the job role and the expected level of
20
Fair Work Ombudsman v Chamdale Pty Ltd [2011] FMCA 1021
14
performance. Whether they have received feedback about their performance
regularly, and been provided opportunities to genuinely address it.
If you find yourself dealing with poor employee performance, our ‘Guide to
Managing Underperformance’ provides a helpful step-by-step process to assist you. It
is important to get performance management right; if you need to address a genuine
underperformance matter, I would urge you to seek expert advice either from within
your organisation, such as from your Human Resources department if you have one,
or from an external industry association or legal practitioner at the start of this
journey.
41. In some cases, the employee may genuinely not be up to the job, and it may be
necessary to let them go if they cannot be trained or encouraged to improve. If this
occurs, ensure you know the proper termination process before you take action.
While we have resources on our website to assist in these circumstances, you should
seek advice from your industry association or legal advisers, as part of a fair and
considered process rather than just after the event.
Excuse number three – ‘That’s what everyone else in the industry pays’
42. Some employers try to justify underpaying their staff by saying “that’s what everyone
else in the industry is doing”.
43. I recognise the need to be competitive and that you may not want to pay higher
wages than your competitors, but in truth, what others in the industry do, or fail to
do, has no effect on your legal obligations. In the lead up to the Off the Menu
campaign I mentioned earlier, Fairfax Media reported that there is an “army of casual
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staff” in the hospitality industry “being paid wages far below their legal
entitlements”.21 The article included an employer’s highly disappointing response to
the alleged underpayment of wages, that “a lot of the people who work for us work
for other places for a hell of a lot less”. This is not a defence; this is not an acceptable
excuse. Fairfax went on to publish a range of stories featuring commentary from
industry acknowledging the extent of the problem in the hospitality sector, with up
to half of Australia’s restaurants not complying with minimum obligations.22
44. The actions of others are not a defence for the actions you take as an employer, but I
recognise that this practice distorts the market for those following the law and
competing with businesses deliberately avoiding their obligations. As the workplace
regulator, I place a great deal of importance on ensuring a level playing field in all
industries when it comes to workplace relations obligations. Competition within
industries can’t be maintained on the back of employee underpayments and
artificially increased profit margins. As we have seen, these distortions are all too
temporary to be the basis of sustainable practice.
45. In the matter of Iser vPenang Kayu Nasi Kandar Pty Ltd in 2009, we brought litigation
against a company operating a small restaurant in suburban Melbourne.23 The
employer erroneously relied on representations from nearby employees working in
local fast food outlets to set wages for its own employees. This reliance led to a
significant underpayment; at the time of the hearing, the total amount determined as
21
Sydney Morning Herald, ‘Diners unwittingly fund hospitality underclass’ 18 January 2013.
22
Sunday Examiner, ‘Eateries serving up wage inequality’, 27 January 2013.
23
Iser v Penang Kayu Nasi Kinder Ltd and Another (Unreported, Magistrates Court of Victoria, Magistrate Hawkins (ex tempore),
X02915424, 13 May 2009).
16
outstanding included a total of $65,341.03 for one of the employees. A further
$4128.53 and $841.83 were outstanding for two additional former employees.
46. We regularly see businesses seeking to undercut their competitors through labour
costs that do not meet legal minimum requirements, particularly in the service
industries and competitive tendering industries. In an effort to prevent this practice
and ensure a level playing field exists across the board, my office conducts education
and compliance campaigns which target an industry or profession, either
countrywide or within a particular region.
47. In consultation with industry stakeholders, we use our complaints data and industry
knowledge to determine which sectors and professions to focus our campaigns. Last
financial year, we conducted four national campaigns across the Retail, Security,
Clerical and Vehicle industries. We also completed another 22 state and regional
campaigns. Through these campaigns, we completed over 6,500 individual audits and
recovered more than $6 million in underpaid wages for 4,000 employees.24
48. Ultimately, while it might seem simple to follow what everyone else is doing, is that
really what is best for your business? Underpayments tend to be associated with high
staff turnover and lower levels of motivation and productivity. They can also damage
your reputation as an employer. Employers who successfully develop and retain a
productive workforce are ahead of the game in a range of areas, including staff
engagement, motivation and productivity. They are the employers who respect their
staff, follow the law, and lead the industry.
24
Payments were recovered for a total of 3898 employees across 6547 individual audits.
17
49. Employers sometimes tell me that the law is wrong – that the pay and conditions set
for their employees don’t reflect current practice or what is right for the industry. To
this, I say that the pay and conditions for your industry have been set in consultation
with your industry by the Fair Work Commission, which is completely independent of
my organisation. There are processes to vary Awards; enter into collective
agreements or Individual Flexibility Arrangements, each of which could modify a
provision you consider as undesirable. Regardless of whether you agree with the law,
you are still required to comply with it.
DON’T CUT CORNERS
The Fair Work Ombudsman Litigation Policy and role of Fair Work Inspectors
50. Mistakes occur; complaints about underpaid wages are made25; and we choose
certain businesses for audit depending on what we know about their industry,
location or employment practices and profile. In around half the businesses we see,
there is a problem of some kind – lack of record-keeping perhaps or an
underpayment of wages, whether inadvertent or deliberate.
51. The way we approach this work is essentially through a model of voluntary
resolution, coupled with strategic investigation and litigation. Litigation is a tool we
use sparingly – last year we commenced 51 litigations from the 28,412 complaints we
finalised. For a complaint to be even considered for litigation, there must be shown a
significant disregard for workplace laws by the duty holder, or a clear decision not to
cooperate with our Inspectors. We always aim to work with employers to resolve
25
In 2011-2012, a total of 26,366 complaints were received.
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workplace issues. Litigation is a costly procedure for us, but sometimes it is the most
appropriate course of action.
52. The Fair Work Ombudsman’s litigation policy26 , as I have mentioned in previous
forums, is reflective of two core philosophies. First, that the social good which is the
workplace relations safety net will be most beneficial to the Australian community if
it operates as a truly universal safety net. Second, that, as is a strongly held and
mostly self-evident view, it is neither desirable nor necessary to penalise every
offender in order to achieve the wider goal.
53. In line with these sentiments, more than a third of the complaints we received last
financial year were finalised in our first stage voluntary resolution process. In the past
year we have successfully resolved more than 1600 disputes through formal
mediation. 27 To date, our mediation team facilitated more than $2.5 million in
settlement payments, and successfully resolved 82% of disputes scheduled for
mediation (including disputes finalised through our mediation intake process). The
mediation team has facilitated the early resolution of disputes, mostly at the preinvestigation stage, by assisting workplace participants to resolve issues through
discussion and agreement. By providing mediation at the pre-investigation stage, we
are assisting parties to resolve their disputes and take ownership of solutions quickly
and easily. Not only does this free up our investigatory resources to focus where they
are most needed, it instils both parties with an understanding of the power these
conversations can have in resolving workplace conflict.
26
Litigation Policy of the Office of the Fair Work Ombudsman Guidance Note 1, FWO Guidance Notes
27
At 30 January, 1658 matters had been resolved by the Mediation Team, with $2 571 675 facilitated in settlements.
19
Avoid and correct mistakes
54. The easiest way to avoid problems with a Fair Work Inspector is to check and check
again (and I recognise that is probably trite advice). However, we see – all the time –
an inattention to detail being the foundation for significant problems. Perhaps you
don’t have the most recent wages information; perhaps you don’t understand (or are
blind to the possibility) that penalty rates apply to time your employees work.
55. Last year, a restaurateur wrote to me. He was offended that one of my inspectors
had written to him saying that on this occasion there would not be a prosecution,
despite him recommending that to his manager. The restaurateur wanted me to
know how much he contributed to the economy and his industry. My reply noted
that the former employee’s complaint to us was the fourth involving the employing
entity in the past 18 months, with three received since November 2011. At least
three of the matters surrounded the use of annualised salaries. I then said;
“While Fair Work Inspectors strive for education of employers about their
responsibilities and the need for subsequent modification of employment practices if
education is perceived by them to be working, I expect they look for patterns and
when seen either escalate the matter for closer attention, or warn the employer that
repetition will lead to stronger sanctions.
In your case both were done, and I am satisfied it was proper to do so.
In my experience, a history of recent and ongoing non-compliance can indicate a lack
of awareness and understanding of an employer’s workplace relations
responsibilities. At its worst, such non-compliance can reflect a systemic and
20
deliberate avoidance of workplace relations obligations worthy of the
commencement of legal proceedings.
While our contact with your Human Resources Manager has been very helpful, it may
assist you against future claims if you could take a look not only at the template you
use for determining annualised wages, but also the mechanism by which you resolve
any internal complaints about adequate compensation.
As we see it, your annualised wage template is probably insufficiently sensitive to
small variations in hours worked to adequately protect you and therefore probably
needs revision. This is a risk for you that if not corrected it may lead to further
underpayment claims, and potentially stronger compliance action on our part. ...
After looking at how we handled the discussion, I think our inspector was correct to
alert his managers to the possible need for litigation which, after all, is a deterrent
tool as much as it is a punishment. Given that previous matters involving your
company were resolved without the need for extensive investigation, our managers
were also correct in deciding it was not warranted on this occasion. They were correct
to accept your past history was of cooperation.”
56. Good recordkeeping is essential, as well as being an obligation of the legislation. I
often hear employers say they don’t have time to issue pay slips or keep employment
records, or that their employees don’t ask for them. What these employers haven’t
appreciated is that record keeping is not only a legal requirement, it helps them lay
effectively plans for their business and assist them with meeting other obligations,
such as taxation and superannuation. Importantly, they are also critical for
employees’ own financial management and personal life, such as when they need
evidence of employment to apply for a rental property or mortgage.
21
57. Employees who don’t receive payslips are often unsure if they are being paid
correctly and, in workplaces without a culture of open communication, may feel
uncomfortable approaching their employer. This can lead to complaints to my agency
that should never have been made. Employees should never have to ask for a pay
slip. As an employer, you should be issuing pay slips containing all required
information, within one day of payment.
58. If a complaint is made, a Fair Work Inspector will look at your records to find out
what the employee is entitled to and to determine if they're getting those
entitlements. If you’re operating in line with the Fair Work Act and have records to
prove so, the matter will be resolved with very little fuss. Without records and pay
slips, you are leaving yourself open to problems.
59. It is in your own interest to keep thorough records. There are specific record keeping
requirements in the Fair Work Act, but it’s a good idea to also maintain records
beyond payslips and leave entitlements. Keep records of significant interactions with
employees, such as disciplinary proceedings and discussions that may have taken
place regarding punctuality, absenteeism or performance.
60. To make record-keeping easier for you, we offer over 50 different templates,
including template pay slips and letters, for you to integrate into your existing
operational procedures.
22
Cooperate, and don’t act in haste
61. Should an employee make a compliant to the Fair Work Ombudsman, cooperate as
much as possible with the Inspector, seek advice if you need it, and rectify issues
promptly.
62. If you are notified of a complaint, in the first instance, make sure you’re meeting all
of your statutory requirements. There is a wealth of information on
www.fairwork.gov.au to help you find your way. If you’re in doubt about something,
call us, or contact your industry association or legal advisers for assistance.
63. If a matter progresses to an investigation, a Fair Work Inspector will very likely
provide the employer with a Notice to Produce employee records and other potential
evidence. While there are various processes to question the need for documents or
to withhold legally privileged documents, generally a duty-holder does itself no
favours by withholding employee records.
64. A case decided this week by the Federal Magistrates Court28 illustrates the point;
a. Quincolli Pty Ltd, which formerly operated an inbound call centre for several
NSW municipal councils and other organisations, was fined $81,000 and
ordered to pay a total of $193,419 in underpayments of wages to 33 call
centre staff. In addition, Quincolli Director, Judith Madge Potter, who
managed the call centre at the time of the underpayments, was fined
$26,500.
28
Fair Work Ombudsman v Quincolli Pty Ltd & Anor [2013] FMCA 17
23
b. Federal Magistrate Rolf Driver found that Mrs Potter was involved in Quincolli
underpaying 33 casual employees’ minimum hourly rates, overtime rates,
annual leave loadings and shift, weekend and public holiday allowances in
2009. The largest underpayment of an individual employee was $17,467.
Federal Magistrate Driver said the contraventions represented a failure to
provide basic and important entitlements under workplace relations
legislation and needed to be taken seriously and that;
“The purpose of that legislation is to provide a safety net which ensures adequate
minimum entitlements to employees, particularly those who are vulnerable or are on
low income rates,”29
65. The case also involved the non-production of documents in response to a Notice to
Produce (NTP) from a Fair Work Inspector, about which Federal Magistrate Driver
said;
“NTPs are a key aspect of the investigative power vested in Fair Work Inspectors by
the Fair Work Act. Non-compliance with NTPs has the capacity to frustrate the
effectiveness of the exercise of those powers and consequently, the Fair Work
Ombudsman's capacity to enforce rights and obligations arising under the Fair Work
Act
In this case, the Fair Work Ombudsman demonstrated reasonable attempts to secure
voluntary co-operation from the respondents, including by the provision of a fair
opportunity to produce relevant documentation and records. Notwithstanding those
efforts, the respondents failed to comply with the NTP
29
Fair Work Ombudsman v Quincolli Pty Ltd & Anor [2013] FMCA 17, [43].
24
The NTP was issued on 5 July 2010 and no challenge was raised or made as to its
validity. The NTP required the documents specified to be produced by 19 July 2010.23
Without prior explanation or reasonable excuse the respondents failed to comply
with the NTP and by letter dated 16 July 2010 (received on 20 July 2010) Mrs Potter
stated that she would not comply with the NTP. That letter was an expression of
defiance.
The failure to comply with the Notice to Produce was intentional and deliberate.
There are no mitigating factors. Quincolli treated its obligations in this regard as
entirely optional or discretionary. The need for both general and specific deterrence
in respect of this contravention is high.”30 (my emphasis)
As a result of this finding, the company was fined $18,000 for its breach of the
obligation to provide the records as required by the Notice to Produce, and its
Director, Mrs Judith Potter was personally fined $5,500 for her involvement in the
contravention.31
66. Of course, wherever possible, our preference is to achieve compliance through less
formal means than litigation. Where necessary, we have a range of alternative
enforcement options, including Compliance Notices, Penalty Infringement Notices,
Enforceable Undertakings and, increasingly, Deeds of Proactive Compliance with
individual businesses.32 As a result of these alternatives, our current litigation profile
reflects our broad agenda to influence systemic or deliberate non-compliance issues
and determine clarity on procurement chain responsibility.
30
Fair Work Ombudsman v Quincolli Pty Ltd & Anor [2013] FMCA 17, [67] to [74]
31
I record that the matter of the Fair Work Ombudsman v Quincolli Pty Ltd & Anor [2013] FMCA 17 is now under appeal.
32
See for example http://www.fairwork.gov.au/media-centre/media-releases/2013/01/pages/20130114-mcdonalds-mr-proactivecompliance-deed-results.aspx.
25
67. So, as I have said, we don’t make decisions to litigate lightly or frequently. Before we
file any proceeding in Court, the duty-holder will have had several opportunities to
explain what has gone on and to rectify underpayments or practices said to have led
to their non-compliance. Therefore, when the Fair Work Ombudsman institutes legal
proceedings in approximately 50 matters a year, they are of significant factual and
jurisdictional gravity to warrant such action.
68. Very rarely do we litigate where duty-holders have corrected an underpayment or
recognised that they were acting in breach of their obligations. If you do come into
contact with an Inspector and don’t agree with their findings, let us know. We will
always consider reasonable challenges to our findings.
OPEN COMMUNICATION AND LEADERSHIP
69. Before concluding, I would like to highlight some other things you can do to ensure
you are meeting your obligations and managing what is one of the most significant
aspects of your business.
70. Firstly, open communication within the workplace is one of the most critical factors
in allowing you to manage issues that arise without the need for external
intervention. Encouraging and facilitating your employees’ understanding of your
business, their roles as employees and their entitlements will help to create this type
of workplace culture.
71. Effective leadership at all levels of the organisation is the key driver of a positive
workplace culture, delivering increased staff engagement, retention and
performance. Many of the problems my agency witnesses, and ultimately gets
26
involved in as a third party, could be avoided if employees and their managers were
able to have practical, open conversations about issues in the workplace, be they
about wages and conditions, performance expectations or grievances.
72. The benefits of self-resolution are numerous, with processes invariably being less
time-consuming, more cost effective and less formal than third party intervention.
Research undertaken by the Department of Industry, Innovation, Science, Research
and Tertiary Education also suggests that self-resolution can actually help maintain
and improve the employment relationship.33
73. There are additional steps an employer can take to minimise and resolve conflict in
the workplace, as well as allowing disputes to be dealt with when they do arrive.
These include:
a. encouraging the open and professional expression of opinions by staff and
management
b. recognising the importance of emotions in conflict situations
c. listening to what people have to say
d. focusing on interests rather than positions and personalities
e. making sure you have clear discipline, grievance and dispute handling
procedures in place, and
33
Department of Innovation, Industry, Science & Research, ‘Resolution of small business disputes options paper’, 2011.
27
f. including mediation processes in contracts of employment as well as
individual disciplinary and grievance procedures.34
74. I know that some of these recommendations may be easier said than done, but you’ll
find that these measures will work towards limiting the need for third party
intervention. Resolving issues in the workplace requires effective communication
between parties - and diplomacy and cooperation. As a manager myself, I know that
these conversations can be incredibly challenging.
75. That’s why as an agency, we are putting more effort and resources into developing
tools that help employers and employees have those difficult conversations. A great
deal of our strategic plan focuses on empowering workplace participants to resolve
issues that may arise at the workplace level.
76. I don’t want my promotion of self-resolution of workplace issues to be perceived as
me trying to outsource my work to employers and employees. I know there will
always be a role for us to play as a regulator, and there will always be those
businesses that need to be reminded of their obligation to follow the law. Our best
chance to facilitate a culture of fairness, however, is to ask employers whether they
want to be the type of business that needs or wants a regulator to be involved in
their dispute. The logical response to this question will always be ‘No’.
CONCLUSION
77. In closing, I hope my advice assists your workplaces. There are steps you can take to
educate yourself and your employees about the rights and responsibilities we all
34
ACAS – Disputes and conflict in the workplace, available at http://www.acas.org.uk/index.aspx?articleid=1662.
28
have in our workplaces. As your businesses’ respective leaders, it is within each of
your control to facilitate more open channels of communication, dispense with issues
that arise quickly and transparently and prevent protracted disputes. I sincerely
believe this is at the core of building fairer workplaces.
78. As George Bernard Shaw said:
“the single biggest problem in communication is the illusion that it has taken place.”
79. Seek help and advice when you need it, remedy any issues you identify and be open
and accountable. If you have firm employment practices in place that recognise the
contribution of your employees and value accountability, you are far less likely to find
yourself in a situation like those I’ve described today.
29