A warning to business directors and employers: don’t short change your staff or you could personally end up out-of-pocket! In June 2016, a Gold Coast security business and its sole director were hit with penalties totalling $308,000 for the deliberate underpayment of eight security guards. These penalties are the highest achieved by the Fair Work Ombudsman in Queensland and are around 13 times the amount of the $22,779 underpaid to the eight employees over a three-month period in 2014. This case is a pertinent reminder that Fair Work will seek court orders against individual owners and directors who are directly responsible for contravening the Fair Work Act 2009 (Cth) (FWA).
The case: Fair Work Ombudsman v Step Ahead Security Services Pty Ltd & Anor [2016] FCA 1482
On 17 June 2016, the Fair Work Ombudsman won proceedings against Step Ahead Security Services (SASS) for failure to pay employees the award rate. The Federal Circuit Court took into account that SASS was in the process of winding up, underpayments were deliberate, no apologies were made and the underpayments were outstanding with no evidence that the payments would be rectified.
SASS was penalised $257,000 and its sole director, Owen Jennings was personally penalised $51,400. The Court agreed with the Fair Work Ombudsman’s submissions that the penalties need to be significant enough to deter future contraventions of the FWA.
Warnings to employers, managers and HR staff
This case sets a strong precedent that employers, managers and human resources staff can be personally liable for a company’s breach of the FWA. You can be personally liable if you are involved in a contravening act despite not knowing that the act constitutes a contravention. Ignorance of your obligations under the FWA does not constitute a defence.
Additionally, winding up a company does not prevent the Fair Work Ombudsman from seeking payment from the directors for underpayments of employees. In order to avoid hefty penalties and contravening the FWA, your payments must comply with industry codes and your employees must receive the right entitlements.
