Company director fined $50,000 by watchdog over ‘direct involvement’ in underpaying young workers

director fined

The director of a now-collapsed catering company has been slapped with a $50,000 fine for his direct involvement in underpaying five employees, despite being put on notice to pay them correctly.

In a judgement passed down last week in the Federal Circuit Court, the Fair Work Ombudsman (FWO) succeeded in its case against A to Z Catering (AZC), a company which provided cooks and caterers to a popular restaurant in Wagga, New South Wales. In 2015, the company was accused by the FWO of underpaying seven workers by over $24,000.

The company admitted to the underpayment in August 2018, however, a contested hearing led to the penalties against the director not being passed down until this month. In that hearing, Judge Manousaridis determined the director had been directly involved with underpaying five of the affected workers a total $8,054, and the involvement was “deliberate”.

The Court also found the director to have made a number of other breaches, including not paying superannuation to a number of employees and failing to provide payslips, despite Manousaridis saying there was “no question” the director was aware of his obligations to do so.

“[The director] was aware of the award, its coverage and its basic terms, [the director] believed some award applied to the relevant employees, but he did not concern himself to determine which award applied because he had no intention of acquainting himself with the terms of any award that might have applied to AZC and its employees,” Manousaridis said.

The director was also accused of knowingly underpaying workers due to his experience running several businesses, being the current director and shareholder of two businesses at the time of the ruling, and having run “at least five restaurants” in the past.

The director was also found to have provided false payslips to the FWO during its investigation and provided “no contrition or material co-operation” with the watchdog.

The workers were underpaid due to being paid flat rates of either $10 or $20 per hour, with some being paid apprentice rates despite not being registered as apprentices. The business paid back all affected workers after the FWO commenced legal proceedings.

In a statement, fair work ombudsman Sandra Parker said the action demonstrated the watchdog’s clear intent to take action against individuals in business who were directly involved with underpayments.

“It is unacceptable that [the director] underpaid workers despite being aware of his obligation to pay minimum award rates of pay. We are clearly prepared to take action against individual directors for their involvement in underpaying workers and will use all provisions of the Fair Work Act to hold individuals to account,” Parker said.

A number of the workers affected were in their early-20s at the time of the underpayment, with one being just 17 years old. The FWO became aware of the underpayment when the workers reached out to the ombudsman with their concerns.

“Employers should note we are prioritising matters involving requests for assistance from young workers as they can be particularly vulnerable in the workplace and reluctant to complain. We encourage any workers with concerns about their wages or entitlements to contact the Fair Work Ombudsman,” she said.

A $50,000 deterrent

The director was fined a total of $50,100, which was broken down into 14 different pecuniary penalties relating to specific contraventions of the Fair Work Act. Each individual penalty carries a maximum of $12,300, making the total penalty on the lower end of what’s possible.

However, Judge Manousaridis said the penalty was set high enough to deter employers who might be tempted to “obtain a cost advantage at the expense of their employees by paying their employees amounts that fall below the legally required amounts”.

“A penalty should be set at a level that, having regard to the other circumstances of the case, should signal to employers who might be tempted to seek a competitive advantage at the expense of their employees that there is a significant risk to their succumbing to such a temptation.”

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