Non Award Com­pli­ance Can Real­ly Cost Small Businesses

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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 Café Water Gar­dens Pty Ltd & Anor [2012] FMCA 794 & Fair Work Ombuds­man v Tur­bo Café 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.

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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 need…to 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.