First Successful “Serious Contravention” Underpayment Yields Huge Fine

Posted on November 26, 2020

Laws introducing hefty penalties for “serious contraventions” of the Fair Work Act 2009 (Cth) were introduced in 2017. Those laws provided for hefty penalties to apply where there was a “serious contravention” which occurs when a person knowingly contravenes the Fair Work Act and their conduct was part of systematic pattern of conduct. Currently penalties are up to $666,000 for a company and $133,200 for an individual.

In Fair Work Ombudsman v Tac Pham Pty Ltd and Anor [2020] FWCA3036, an employer that underpaid 11 employees a total of just $5,111 was ordered to pay $230,040 in penalties. The general manager was ordered to pay $38,394 of that amount personally.

The court did not accept the general manager’s explanation that the underpayments were caused by her significant English language difficulties, problems understanding the payroll system and that she was juggling parenting six children.

The court noted that some of the workers were particularly vulnerable and included junior employees and even some family members.

The fact that the underpayment was small and did not provide any great windfall or commercial gain for the employer did not mitigate the need for general and specific deterrence and the imposition of the huge penalty.

Take away lessons

Employers must ensure that they carefully understand their employment obligations and all of the terms and conditions of the specific award or industrial instrument which apply to their enterprises. Misclassification under awards is quite common.

Employers are urged to seek legal advice in interpreting and understanding industrial instruments and should ensure that they have well drafted employment contracts. Remember also that paying 'over award’ does not necessarily protect you from an underpayment claim.

If you require assistance in reviewing your current employment arrangements please contact the employment law team at Lynch Meyer on 08 8223 7600.

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