14 February 2013 Non Award Compliance Can Really Cost Small Businesses

By Warwick Ryan, Partner and Nathan Day, Solicitor

In Brief

The Federal Magistrates Court has issued a very clear warning to small businesses to comply with the minimum entitlements set by awards or risk getting severely fined.

Fair Work Ombudsman v Turbo Cafe Water Gardens Pty Ltd & Anor [2012] FMCA 794 & Fair Work Ombudsman v Turbo Cafe Point Cook Pty Ltd & Anor [2012] FMCA 795

The above decisions concerned a punitive claim taken by the Fair Work Ombudsman against a company and its controlling director ("Turbo Cafes") which operated two takeaway food cafes in Melbourne and that had underpaid just two of its employees for a combined total just above $10,000.

These underpayments related to failure to pay the minimum wages, casual loadings, overtime rates, annual leave and annual leave loadings set by the Fast Food Industry Award 2010, the previous national award and the Fair Work Act 2009.

Determining the Fine

In determining the fine to be made against Turbo Cafes, the Court considered the following factors:

  1. The nature and extent of the underpayment;
  2. Whether the employer had previously underpaid employees;
  3. The size of the employer's business;
  4. The deliberateness of the underpayment;
  5. The involvement of senior management;
  6. Whether the employee had shown remorse by addressing the underpayment quickly and cooperating with the authorities;
  7. The need to ensure compliance with minimum entitlements to protect employees' rights;
  8. The need to impose sufficient penalties to deter employers from underpaying employees; and
  9. The need to ensure that the penalty imposed is not too harsh in proportion to the underpayment.

In considering these factors, the Court ordered fines against Turbo Cafes for a total of $93,840 because of the reasonable size of the underpayment, the previous conduct of the employer in being subject to three previous underpayment complaints, the employer's complete disregard of their obligations, the employer's significant delay in correcting the underpayment and the employer's minimal cooperation with the Fair Work Ombudsman.

Warning to Small Business Employers

The Court emphasised that small businesses will not be excused from failing to pay employees their minimum entitlements and gave the clearest of warnings to such businesses:

"There is a send a message to the community at large, including small employers, that the correct entitlements of employees must be paid and that steps must be taken by employers (of all sizes) to actively ascertain and comply with minimum entitlements. Compliance should not be seen as the bastion of the large employer with human resources staff and advisory consultants behind them."

The message is to get the right advice as to the correct award and your obligations to your staff pursuant to it – and follow it.

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This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.

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