Prosecution for breaches of the Fair Work Act is on the rise: directors, watch out!

Prosecution for breaches of the Fair Work Act 2009 (Fair Work Act) is on the rise, and not just against companies but against directors personally.

Over the Festive Season / New Year period the Federal Circuit Court handed down nearly $600,000 in penalties in eight separate cases brought by the Fair Work Ombudsman. The recent cases all related to underpayment of wages in some form, including wages for foreign nationals working on visas as well as payments to unpaid interns who were in fact deemed to be employees. In each of the cases both the companies and some company directors were fined, and the penalties were exacerbated in cases where directors had failed to comply with notices from the Fair Work Ombudsman.

The cases demonstrate an increased focus by the Fair Work Ombudsman on underpayments and a willingness for the courts to hold directors personally liable. Further, a number of the recent cases involve restaurant and hospitality businesses which have been the largest source of complaints to the Fair Work Ombudsman since the inception of the Fair Work Act, and the industries in which the Fair Work Ombudsman has identified the highest volume of contraventions of workplace laws.

The Judge in Fair Work Ombudsman v Primeage Pty Ltd & Ors [2015] FCCA 139 identified that there was a need for general deterrence with respect to the restaurant and hospitality industry which “have been recognised as notorious for non-compliance with workplace laws as long ago as 2008,” and that “a high level of complaints come from young workers and visa holders and the industry employs large numbers of low-skilled workers.” In that case the Judge fined the company $80,000, one of the directors $17,500 and the other $13,000.

In Fair Work Ombudsman v Ohmedia Melbourne Pty Ltd & Anor [2015] FCCA 50 the Judge fined the company $85,000 and the director $15,000 personally in finding that the company had been “reckless” in failing to seek advice about its obligations to 45 casuals the company employed. In determining the penalties, the Judge too into account their lack of remorse and failure to rectify the underpayments.

So what is the lesson to employers?

It goes without saying that payment of appropriate wages is of paramount importance, as is having due regard to obligations under the Fair Work Act with respect to employee entitlements. However, what we’re seeing is a willingness for the courts to hold directors personally liable for the people they employ. It is not simply acceptable to plead ignorance or to hide behind “company practices”. Employers need to be proactive about ensuring that they are not the next business which the courts and the Fair Work Ombudsman use as an example of bad practices to deter others from doing the same.