Business owners and operators have been reminded they are personally responsible for staff underpayments, not just their company, following a Fair Work Ombudsman underpayment case.
A former operator of Melbourne retail chain CM’s Fashion has been fined $11,220 by the Federal Circuits Court for underpaying a store manager by $5000.
The store manager resigned in February 2010, but upon quitting was not paid the appropriate annual leave entitlements. The court ordered owner/operator Uri Burke repay the former employee $5000 plus an additional $1422 interest within 60 days.
Get daily business news.
The latest stories, funding information, and expert advice. Free to sign up.
Burke’s private business was formerly known as Tovek, but it went into liquidation in September 2011, preventing penalties from being imposed against the company.
This is the second time Burke has come under scrutiny from the FWO for underpayment.
In 2010, Burke and his company had been fined $19,500 by the Melbourne Magistrates Court for underpaying two employees $6940. Judge Frank Turner found the most recent underpayment case occurred in the same week Burke received a fine for the other 2010 underpayments.
Turner said Burke was a “repeat offender” with “no evidence of contrition”.
“In the circumstances, the respondents are taken to have known their obligations, but chose to avoid them.”
“It is possible that he (Burke) will re-engage in a similar role in the future. He must be deterred from engaging in similar conduct,” Turner says.
SmartCompany was unable to contact Burke.
M+K Lawyers partner Andrew Douglas told SmartCompany when issuing penalties, the courts consider “what is the general deterrence message and what is the specific thing I want to stop the individual from doing again”.
“The really big take-home message to businesses is the FWO and the courts will pursue the individual, the decision-maker, where there has been deliberate underpayment.”
Douglas says this case demonstrates that businesses must pay their employees fairly both when they’re at work and when they’re leaving.
“It’s a lawful responsibility on the employer,” he says.
Douglas says $5000 in annual leave payments would equate to around 4-5 weeks of leave for the store manager.
“It’s important for businesses to ensure people do take their leave. The evidence is overwhelming that unless you give people appropriate leave, their productivity drops.”
“It doesn’t assist a business to drive someone too hard and encourage them not to take leave, because it will end up reducing productivity,” he says.