Time to audit compliance with industrial obligations as workplace relations watchdog starts to bite
| "Employers have a responsibility to make themselves aware of their obligations under the law.”
Federal Magistrate Mowbray, 2 February 2007 |
Two recent cases commenced by the Office of Workplace Services ("OWS”) against employers in the Federal Magistrates’ Court of Australia ("FMC”) demonstrate that the OWS is a watchdog with real bite.
Both cases show a preparedness, on behalf of the OWS, to commence actions against employers who have breached the Workplace Relations Act 1996 ("Act”), awards or other industrial instruments; both with significant consequences for the employers concerned.
In this special edition of LegalTalk, we explain the implications for employers arising out of these recent prosecutions by the OWS.
The role of the OWS
The OWS is the Federal Government’s enforcement agency/regulator in relation to compliance with the Workplace Relations Act 1996 ("Act”).
The OWS carries out its functions:
- through education campaigns;
- by Inspectors investigating claims of alleged breaches of federal instruments and/or the Act; and
- in appropriate cases, by initiating legal proceedings.
What does the OWS investigate?
Inspectors can investigate breaches of:
- workplace agreements;
- awards;
- the Australian Fair Pay and Condition Standard ("AFPCS");
- minimum entitlements (e.g. in relation to meal breaks); and
- other requirements of the Act or Regulations (e.g. requirements in relation to pay records).
What powers do Inspectors have?
The powers of the Inspectors are set out in the Act. They are significant.
Inspectors may:
- without force, enter premises (to investigate a potential breach);
- inspect any work;
- interview any person; and
- require a person having the custody of, or access to, a document to produce the document to (or copy the document for) them within a specified period.
A failure to produce (or copy) a requested document may be an offence.
Unless there is a "reasonable excuse" for not complying with a request, the penalty is up to 6 months’ imprisonment.
Under the Act, it is no excuse that the document might incriminate the person required to produce it.
Mason v Pangaea Restaurant & Bar [2007] FMCA 7 ("Pangaea”) and Flattery v Zeffirelli’s Pizza Restaurant [2007] FMCA 9 (Zeffirelli”)
Both the prosecutions in Pangaea and Zeffirelli were commenced by the OWS following complaints about underpayments by employees.
On 16 January 2007 and 2 February 2007 the Federal Magistrates’ Court delivered judgments respectively in Pangaea and Zeffirelli.
The Federal Magistrate ordered the employer in:
- Pangaea to pay moneys underpaid to employees ($3,816.33) plus interest and fined the employer $64,000; and
- Zeffirelli to pay moneys underpaid to employees ($5,052.17) plus interest and fined the employer $50,000.
The message to employers is clear. The potential size of the penalty for underpaying employees far outweighs the short term commercial advantage of doing so.
In both Pangaea and Zeffirelli, the employers admitted that they had underpaid the employees and indicated a preparedness to make good the underpayment. However, that was no impediment to the OWS continuing with its prosecution.
Why such large penalties?
In both cases, the FMC highlighted the objects of the Act which "emphasise the importance of minimum standards, including wages, and the enforcement of those standards.” The FMC also noted that under Work Choices the "maximum penalty …. was raised from $10,000 to $33,000, an increase of 230 per cent.”
Accordingly, the FMC accepted that "any light handed approach that might have been taken in the past to serious, wilful and ongoing breaches of industrial laws should no longer be applicable.”
What if the breach is not deliberate?
In Pangaea the Federal Magistrate accepted that, while some of the employer’s breaches were caused by a mistake, others must have been wilful. Therefore, those occasioned by mistake resulted in a lesser penalty.
However, in Zeffirelli the Federal Magistrate did not find any evidence of deliberate disregard for the employer’s legal obligations. But, he also did not accept that the underpayments were the result of a mistake. Rather, the FMC found that the directors were "extremely careless in failing to properly ascertain their obligations under the workplace relations legislation.” The failure to ascertain those obligations required that a large penalty be imposed as a deterrent.
Lessons for employers: The size of the penalties in Pangaea and Zeffirelli send a clear message to employers that:
- underpayment of wages will not be tolerated;
- the OWS is a vigilant regulator prepared to prosecute employers;
- employers can not rely upon their ignorance of industrial obligations; and
- employers should seek advice:
- about their industrial obligations (including auditing current practices); and
- when approached by OWS investigators.
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