Multinational technology company IBM has back-paid Australian employees more than $12 million after entering into an Enforceable Undertaking (EU) (DOCX 53.8KB) (PDF 12.3MB) with the Fair Work Ombudsman.

IBM Australia Ltd and IBM Global Financing Australia Limited self-reported to the regulator last year that they had underpaid employees after failing to apply the relevant Awards.

The underpaid employees, located across all States and Territories, were variously covered by Business Equipment Award 2010, the Professional Employees Award 2010, the Banking, Finance and Insurance Industry Award 2010 and the Nurses Award 2010.

IBM had failed to apply the Award to most of its employees because they were salaried professionals earning significantly above minimum Award wage rates.

This led to IBM failing to provide employees with more than 15 different Award entitlements and conditions, with the most significant issues relating to vehicle allowances, superannuation entitlements and annual leave loading.

A significant number of casual staff at IBM’s contact centre in Ballarat were paid the National Minimum Wage, as opposed to the higher rates and entitlements in the applicable Award.

As at 1 February this year, IBM had identified and back-paid 1647 workers a total of $12.3 million, which includes interest, for underpayments that occurred between 2012 and 2020. Individual back-payments range from less than $1 to over $145,000. The employees impacted included technical professionals who use a motor vehicle as part of their role, as well as the casual workforce.

Further underpayments, expected to be significant in size, are yet to be quantified and the EU requires the organisation to calculate and pay outstanding amounts to every affected employee by 16 October this year.

Fair Work Ombudsman Sandra Parker said that an EU was appropriate as IBM had cooperated with the investigation and demonstrated a strong commitment to rectifying all underpayments.

“Under the Enforceable Undertaking, IBM has committed to stringent measures to comply with the law and protect its workforce. This includes engaging, at its own cost, an expert auditing firm to conduct an independent assessment of the outcomes of its rectification program and to audit its compliance with workplace laws over the next two to three years,” Ms Parker said.

“This matter serves as a warning to all employers that if you don’t prioritise workplace compliance, you risk underpaying staff on a large scale. Any employers who need help meeting their lawful workplace obligations should contact the Fair Work Ombudsman for free advice.”

The Enforceable Undertaking commits IBM to make two contrition payments to the Commonwealth’s Consolidated Revenue Fund by 27 November 2020. In total, the two contrition payments will be equal to 5.25 per cent of the underpayments IBM identifies for all employees.

Under the EU, an expert will conduct its own review of the underpayments identified by IBM, which is due to be completed next year, and report the results directly to the FWO. Any further underpayments identified by the expert will attract a higher contrition payment of 7 per cent.

IBM must also fund an independent organisation to operate a Hotline to assist its employees for the next 12 months. IBM is also required to display public, workplace and online notices detailing its workplace law breaches, and must apologise to workers.

Western Australian electricity network provider Western Power has back-paid employees more than $8 million, and is reporting to the Fair Work Ombudsman to ensure it correctly calculates and finalises further significant back-payments, under an Enforceable Undertaking (EU) (DOCX 52.3KB) (PDF 11.8MB) entered into with the FWO.

Western Power, a statutory corporation owned by the WA State Government, self-reported to the regulator last year that it had underpaid employees located in Perth and the South-West of WA.

The affected employees were managers, team leaders and staff in professional, para-professional, technical and administration roles, who all entered into Individual Flexibility Arrangements (IFAs).

The underpayments were the result of the company failing to correctly ensure employees on individual agreements were better off compared with the Enterprise Agreements that covered the employees, and excluding entitlements in the Enterprise Agreements which were not permitted to be varied in the individual agreements.

This resulted in Western Power underpaying hundreds of staff pay-point-progression payments, allowances, penalties, overtime, redundancy pay and superannuation entitlements at various times between March 2010 and January 2020.

Before the execution of the EU, the company had identified and back-paid 1,238 workers a total of $8.29 million, which includes interest and superannuation. Individual back-payments range from $2 to over $40,000.

Further back-payments relating to the underpaid entitlements – expected to be significant in size – are yet to be finalised. The EU requires Western Power to calculate and pay outstanding amounts to every underpaid employee by 1 October this year.

Fair Work Ombudsman Sandra Parker said that an Enforceable Undertaking offered to the FWO by Western Power was accepted, given the commitments it included and the level of cooperation the company had shown.

“Western Power demonstrated a strong commitment to rectifying all underpayments, and the Enforceable Undertaking commits the organisation to stringent measures to protect its workforce. This includes an independent assessment of its rectification program by a qualified expert and two future independent audits of its compliance over the next two years,” Ms Parker said.

“This matter serves as a warning to all organisations that if you don’t prioritise workplace compliance, you risk underpaying staff on a large scale. Any employers who need help meeting their lawful workplace obligations should contact the Fair Work Ombudsman for free advice.”

Under the EU, Western Power will make an initial $400,000 contrition payment into the Commonwealth’s Consolidated Revenue Fund, followed by a second contrition payment into the fund next year with this amount to be calculated once underpayments are finalised.

As part of the EU, the organisation must operate a hotline for 12 months that employees can use to make enquiries in relation to their entitlements, underpayments or related employment concerns. Western Power is also required to display public, workplace and online notices detailing its breaches and apologise to workers.

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Introduction

The operator of Coburg restaurant, The Old Cop Shop, has been penalised $22,050 in Court for failing to comply with a Compliance Notice issued by the Fair Work Ombudsman.

Federal Court

The Court found that The Old Cop Shop Eatery Pty Ltd contravened the Fair Work Act by failing to comply with a Compliance Notice requiring it to calculate and back-pay alleged underpayments of a former employee, aged 21.

In addition to the penalty, the Federal Circuit Court ordered The Old Cop Shop Eatery Pty Ltd to rectify the underpayment of the food and beverage attendant plus interest.

Businesses must comply

Fair Work Ombudsman Sandra Parker said the outcome reinforced the importance of Compliance Notices in helping inspectors recover wages for underpaid workers.

“Compliance Notices are an important tool we use to get unpaid wages back into workers’ pockets in a timely manner. If employers do not comply with Compliance Notices, they can face court-imposed fines in addition to the initial wages back-payment bill.”

“We encourage any workers with concerns about their pay and entitlements to contact us for free assistance,” Ms Parker said.

Fair Work Inspectors conducted an investigation into The Old Cop Shop following a request for assistance from the employee.

The Compliance Notice was issued after a Fair Work Inspector conducted an investigation and formed a belief that the restaurant, between April and June last year, had underpaid the employee’s minimum wage rate for ordinary hours, casual loading, and penalty rates for Sunday and public holiday work under the Restaurant Industry Award 2010.

Judge Heather Riley found that the contravention was deliberate, The Old Cop Shop had not displayed any co-operation, contrition nor taken any corrective action, and the affected worker was young and vulnerable.

Judge Riley said that general deterrence was “a significant factor in this case, given that the restaurant industry is notorious for underpayments to staff”.

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Introduction

The Fair Work Ombudsman has secured a $22,440 penalty against the former owner-operator of a labour-hire company following the underpayment of 80 workers on a Queensland mushroom farm.

The Federal Court

The Federal Court has imposed the penalty against Ms Tao Hu, who operated labour-hire company HRS Country Pty Ltd before it went into liquidation in 2016.

Ms Hu admitted that she was involved in underpaying 80 employees a total of $78,664 over an eight-month period in 2014 at a mushroom farm, at Stapylton, south of Brisbane.

The Court ordered that Ms Hu’s penalty be distributed by the Fair Work Ombudsman to the employees to partially rectify the underpayments, which remain outstanding.

The workers were employed by Ms Hu’s labour-hire company, which was contracted to supply labour to the farm.

Some of the underpaid employees were migrant workers, including visa holders. The underpaid employees were paid a flat hourly rate of $16.37.

Flat rate was insufficient to meet the minimum hourly rate

The flat rate was insufficient to meet the minimum hourly rate, casual loading and public holiday rates the employees were entitled to under the Horticulture Award 2010.

The employees were also not provided with paid rest breaks they were entitled to under the Award and a pay-slip law was contravened.

Fair Work Ombudsman Sandra Parker said taking action to improve compliance levels in the horticulture industry remained a priority for the regulator.

“The Fair Work Ombudsman discovered these underpayments during the Harvest Trail Inquiry which was aimed at improving compliance with workplace laws across the horticulture industry.”

“The horticulture sector employs a significant number of vulnerable workers and it is important that we take actions to ensure that they are receiving their full lawful wages and entitlements.”

“We continue to monitor employers along the harvest trail and any workers with concerns should contact us,” Ms Parker said.

The employer has some “wins”

In 2018, in relation to workers paid on piecework rates, the Court dismissed the Fair Work Ombudsman’s separate allegations that farm operator Marland Mushrooms Qld Pty Ltd and the company’s owner-director Mr Troy Marland were involved as accessories in the underpayment of pieceworkers.

The Court also rejected some submissions made by the Fair Work Ombudsman in relation to the operation and application of piecework agreements under clause 15.2 of the Horticulture Award 2010.

 

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SEE also my special report on “Wage Theft” a free resource, by clicking here.

Introduction

The Fair Work Ombudsman has secured $264,690 in penalties against a former Sydney entrepreneur, his wife and three companies he operated in response to employees being underpaid more than $1 million.

The Federal Circuit Court has today imposed $62,730 in penalties against Kia Silverbrook and additional penalties against three companies he operated.

IT company Mpowa Pty Limited has been penalised $96,900, solar cell research company Superlattice Solar Pty Ltd has been penalised $40,800 and Priority Matters Pty Ltd, which processed patent applications, has been penalised $51,000.

Janette Lee, who was a director of a company formerly operated by Mr Silverbrook, has also been penalised $13,260 for her role in some of the contraventions.

Backpay plus interest

During the course of the legal actions, commenced in 2013 and 2014, the Fair Work Ombudsman secured $1.15 million (plus interest) in Court-ordered back-payments, which have been made by Mpowa, Superlattice Solar and Priority Matters to 33 underpaid employees.

Penalties and back-pay orders could not be obtained against two other companies formerly operated by Mr Silverbrook, Geneasys Pty Ltd and Silverbrook Research Pty Ltd, – in response to more than $550,000 in underpayments of a further 10 employees – because the companies have been placed into liquidation.

The Fair Work Ombudsman investigation

The Fair Work Ombudsman investigated after receiving underpayment allegations from employees.

The underpayments were primarily the result of employees not being paid wages for periods of up to 10 months in 2013. Individual employee underpayments ranged from $436 to $214,483.

Comments from the FWO

Fair Work Ombudsman Sandra Parker welcomed the court’s penalties.

“Being paid for work performed is a fundamental workplace right and it is completely unlawful for employers not to pay their employees,” Ms Parker said.

“The Court’s penalty should warn all employers that they can face serious financial consequences for breaking workplace laws. Any employees with concerns about their wages should contact us.”

Underpaid employees included engineers, scientists, patent attorneys, patent assistants, patent design assistants, IT professionals and clerical workers.

Court findings

The Court found that Mr Silverbrook and the companies told staff it did not have sufficient funds to pay wages but encouraged them to continue working without pay for many months by repeatedly assuring them funding would be secured and pay would be shortly forthcoming.

Significant financial problems, stress and anxiety

Employees gave evidence that the non-payment of wages caused them significant financial problems, stress and anxiety.

Employees described the impacts on them of being exploited, including having to delay important life decisions such as starting a family, deferring health procedures and inability to sleep.

The judge sends a message

Judge Rolf Driver said:

“A clear message needs to be sent to the public that employees’ entitlements are not negotiable regardless of insolvency or nearing insolvency of the company.”

“It is important to set a meaningful penalty which will deter other employers who find themselves in difficult financial circumstances from requiring employees to continue to attend work and perform work in the hope of improving the employer’s financial position so that funds will become available to pay the employees,”

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Introduction

The Fair Work Ombudsman has secured penalties of $209,000 against a Melbourne restaurateur, his two companies and his in-house accountant for underpaying workers.

Action

The employees, mostly overseas workers on working holiday and student visas, were underpaid at Tina’s Noodle Kitchen in Box Hill and Dainty Sichuan, on Swanston Street in the Melbourne CBD.

The Federal Circuit Court ordered the owner to pay penalties of $15,000 and his companies Wynn Sichuan Pty Ltd and Nine Dragons Pty Ltd to pay $95,000 and $88,000 respectively.

The companies’ in-house accountant admitted to being an accessory to the underpayment and record-keeping contraventions, and penalised $11,000.

2016 Audit by the Fair Work Ombudsmanends in 2020 penalty

During an audit in June 2016, Fair Work inspectors found that 30 employees across the two restaurants had been underpaid a total of $30,995 and the regulator took action in 2017.

Inspectors found that 17 employees at Dainty Sichuan were underpaid $18,190 and 13 employees at Tina’s Noodle Kitchen were underpaid $12,805.

FWO findings

Employees were paid flat hourly rates of between $10 per hour and $23.33 per hour in breach of the Restaurant Industry Award 2010. Some worked six or seven days a week, and over 10 hours per day.

The FWO comments

Fair Work Ombudsman Sandra Parker welcomed the Court’s penalties.

“The exploitation of migrant workers is unacceptable as they can be particularly vulnerable in the workplace due to language barriers or visa status. Minimum wage rates apply to everyone in Australia, including visa-holders, and they are not negotiable,” Ms Parker said.

“This outcome should serve as a warning to all employers to pay their workers correctly. We encourage any employees with concerns about their pay or entitlements to speak up and contact the Fair Work Ombudsman.”

The Federal Court:

The Court accepted the respondents failed to pay minimum wages; overtime; penalty rates for weekends and public holidays; and to keep records and provide payslips.

Judge Grant Riethmuller said a “large proportion” of the restaurant staff were visa holders who spoke Mandarin as their primary language: “Employees with these backgrounds are in a particularly vulnerable position, and that is a factor to which I give significant weight.”

Underpayments paid

The underpayments were rectified before the proceedings began.

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List of enforceable Undertakings secured by the Fair Work Ombudsman in the last six months of 2019

As a “teaser” to my Special Report” on wage theft, I have listed the Enforceable Undertakings entered into by businesses with the FWO for past six months.

An enforceable undertaking (EU) is a written agreement between the FWO and someone who has not followed an Australian workplace law (eg. an employer). EUs are used to fix a problem and make sure it doesn’t happen again.

EU’s are used instead of taking an employer to court. This may occur where:

  • An investigation has shown that workplace laws have not been followed;
  • The employer is prepared to voluntarily fix the issue; and
  • They agree to preventative actions for the future.

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Lifestyle Solutions Ltd. Date of undertaking: December 2019. $6.36 million.

Lifestyle Solutions Ltd has entered into a Court-Enforceable Undertaking with the Fair Work Ombudsman after self-disclosing underpayments for 124 current and former employees. An internal audit found underpayments of overtime, Saturday and Sunday rates. Lifestyle Solutions has agreed to back-pay affected employees a total of $6.36 million in wages, superannuation and interest.

MOS Burger Australia Pty Ltd. Date of undertaking: December 2019. $1.12 million.

MOS Burger Australia Pty Ltd has entered into a Court-Enforceable Undertaking with the Fair Work Ombudsman after an investigation found contraventions of the Fast Food Industry Award 2010. It found that the company had paid unlawfully low flat rates to workers and misclassified some employees as part-time when they were in fact casuals. The employer has back paid $1.12 million to 285 former and current Queensland workers.

Under the Enforceable Undertaking, MOS Burgers Australia must fund external auditors to check pay and conditions for workers employed in 2019 and 2020 and rectify any underpayments. The company must also register with the My account portal and ensure all senior managers and human resources, recruitment and payroll staff complete training on workplace laws.

Couriers Please Pty Ltd. Date of undertaking: November 2019. $382,065 over an 8-year period.

Couriers Please Pty Ltd entered into a Court-Enforceable Undertaking with the Fair Work Ombudsman after underpaying staff $382,065 over an 8-year period. [Ed: It is my belief that the statute of limitation is six years?].

Under the Court-Enforceable Undertaking, they must:

  • Display notices at the workplace and online detailing their breaches and information about employee entitlements.
  • Register with My account and complete online courses for employers.
  • Fund workplace relations training for their payroll and human resources staff.

Sean and Eddy Pty Ltd. Date of undertaking: October 2019. $36,745.

Sean and Eddy Pty Ltd, trading as Coffee Club, has entered into a Court-Enforceable Undertaking with the Fair Work Ombudsman after Fair Work Inspectors found a migrant worker was paid below the minimum award pay rate, and not receiving penalties. The employer has paid back the employee a total of $36,745 and will improve their payroll process and undertake external audits to ensure that all staff are paid correctly in the future.

Catalyst Child and Family Services Ltd. Date of undertaking: October 2019. $200,000.

Catalyst Child and Family Services Limited entered into a Court-Enforceable Undertaking with the Fair Work Ombudsman after they self-disclosed that they underpaid up to 200 current and former employees. The organisation alerted the regulators after a review found it had underpaid overtime rates, allowances for shift, on-call and sleepover allowances and made errors in classifying employees since it began operating in 2013. They will back-pay workers approximately $200,000 after breaching Australia’s workplace laws.

Luxottica Retail Australia Pty Ltd. Date of undertaking: September 2019. $2,294,496.

Luxottica Retail Australia Pty Ltd, trading as Sunglass Hut, has entered into a Court-Enforceable Undertaking with the Fair Work Ombudsman after self-disclosing that it underpaid 620 current and former employees. Sunglass Hut underpaid workers a total of $2,294,496 in overtime wages, with individual underpayments ranging from $4 up to $42,912.

Thales Australia Limited. Date of undertaking: October 2019. $7.44 million.

Thales Australia Limited entered into a Court-Enforceable Undertaking with the Fair Work Ombudsman after they self-disclosed that they had paid annual salaries below what employees were entitled to under the applicable enterprise agreements. This led to underpayments of minimum wages, overtime, annual leave entitlements and superannuation. The employer has back-paid $7.44 million to 407 current and former employees that were underpaid.

T J D Sayoco Pty Ltd. Date of undertaking: August 2019. $27,086.

T J D Sayoco Pty Ltd, trading as Han’s Cafe Mandurah, entered into an EU with us after Fair Work inspectors found staff were being paid below the minimum award pay rates, and not receiving penalties and overtime rates. The employer has paid back their employees a total of $27,086 and will improve their payroll process and undertake external audits to ensure that all staff are paid correctly in the future.

MADE Establishment Pty Ltd. Date of undertaking: July 2019.

MADE Establishment Pty Ltd entered into an EU with the Fair Work Ombudsman when representatives of MADE Establishment at their own initiative notified the FWO that they had identified non-compliance. This led to underpayment contraventions under the Restaurant Industry Award 2010.

George Calombaris and Made Establishment Admit to $7.8 Million Staff Underpayment, which comes with a $200,000 fine and more.