A Sydney businessman is facing court after he allegedly decided not to pay his staff more than $870,000 when three companies he operated had cash flow difficulties.
The Fair Work Ombudsman has commenced legal proceedings against Kia Silverbrook and the businesses Primary Matters, Geneasys and Superlattice Solar for allegedly underpaying 21 employees between February and August last year.
Fifteen employees from patent application processing company Priority Matters are owed $452,997, five staff members from medical research company Geneasys have allegedly been underpaid $362,973 and one employee from solar research company Superlattice Solar is owed $55,969.
Silverbrook was responsible for the overall direction, management and supervision of operations at the businesses and is a respondent in each of the cases.
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TressCox Lawyers partner Rachel Drew says the only way to have accumulated such a large underpayment sum would have been to not pay some of the employees at all.
“It looks like he had a number of people working for him who were prepared to work without being paid for a number of months,” she says.
“It’s possible the employees continued to work for so long as a way of keeping their jobs.”
Court papers allege when some of the employees queried Silverbrook about their wages, he told staff the three companies did not have the necessary funds to pay the wages.
One of the companies, Geneasys, has since been placed into liquidation, after a winding up order was filed for the company in November last year.
As a result the Fair Work Ombudsman’s proceedings against this business have been stayed, but Silverbrook is still to face court over the underpayments in relation to this company.
The employees worked as engineers, scientists, patent assistants and patent design assistants. They were allegedly underpaid their wages, public holiday pay, casual loadings, annual leave entitlements, termination entitlements, redundancy pay and safety net contractual agreements.
One employee is allegedly owed $166,914.
SmartCompany attempted to contact Silverbrook, but received no response prior to publication.
Drew says employers in financial difficulties will often be late paying wages by “a week or two”, but it’s unusual to see employees go for months without pay.
“The larger the underpayment, generally the higher the penalty will be. It will be dependent on the circumstances though… the level of cooperation with the FWO will be a relevant factor in deciding the appropriate penalty,” she says.
“If it’s genuinely a case where the companies were in financial difficulty, this could have reduced the penalty, but if they’ve failed to cooperate the penalty will be significantly higher.”
Fair Work Ombudsman Natalie James said in a statement the businesses failed to rectify the underpayments despite efforts by the inspectors to resolve the matter.
M+K Lawyers partner Andrew Douglas told SmartCompany people under solvency pressures are often led to “cutting corners”.
“The first things affected will usually be superannuation payments and tax debts,” he says.
“The risk of prosecution for underpaying staff is incredibly high. It will lead to a complaint, as when workers aren’t paid the correct amount, they start raising the alarm.”
Douglas says the fact a business has solvency issues does not mitigate the need to pay wages.
“People deserve to be paid for their work. There is no excuse to have someone at work and not pay them.”
Drew says when a business opts not to pay its staff, it simply “racks up the debt for later on”.
“Silverbrook now also has personal liability. Underpaying the employees will not pay off in the long run, it just results in a personal debt and a company debt.”