Small businesses have been reminded that they are equal to large corporate employers in the eyes of the law, especially when it comes to meeting minimum employment standards.
The Federal Circuit Court has slapped a $240,000 fine on a Melbourne-based small business for underpaying a teenage worker just over $5,000 of his proper net salary and holding back super payments in the amount of $3,030.57.
Supplier and installer of artificial grass Rhino Grass has been ordered to pay the fine and backpay within 30 days, after the court ruled in favour of the 19-year-old worker having established that he was underpaid for ordinary hours, untaken annual leave and public holidays.
According to the court, the teenager did not receive a single payslip during his tenure at Rhino Grass, nor did the business owner make any superannuation contributions for the duration of his employment.
As such, the business was fined $200,000 while the director and sole owner was personally fined $40,000.
In handing down the judgment, Federal Circuit Court Judge Riley said that the penalty decision was based on several elements, including the business owner’s lack of remorse, the employees age and vulnerability, but also the fact that the offences were demonstrated to have affected only one worker.
“It is important that employers understand that, if caught, it is very expensive to not properly pay employees,” Judge Riley said.
Court documents reveal that the worker complained to the employer about underpayments from the very beginning of his employment. Text messages between the employee, his parents and the employer were presented to the court as evidence of underpayments and other wrongdoing.
Based on these, the judge concluded that the employer was “well aware” of details of the worker’s underpayments.
The worker also argued that he was forced to resign because he was not paid his full salary and was required to drive a forklift when he did not have the appropriate licence.
The court backed his claims, finding that the he had been “constructively dismissed”.
In its annual report for the 2018–19 financial year, the Fair Work Ombudsman (FWO) said that its compliance action had seen more than $40.2 million in underpayments reimbursed to more than 17,000 workers across Australia.
Wage underpayments have caused something of split in sentiment between employers and workers. The latter have felt aggrieved at having their legal entitlements not fully paid by companies.
“If you can’t afford to pay the correct wages, then you shouldn’t be in business,” one My Business reader said in response to the FWO’s annual report.
However, employers — particularly small and medium businesses — have argued the system is almost set up to fail, given its complexity drastically increases the chance of mistakes being made and going unnoticed.
“SMEs have no money and are struggling to make ends meet. Sure, there are many complaints about the poor workers not getting the huge benefits that they are entitled to; however, what about the owner of the business who often is paid way less than the employees,” one employer replied to the above comment.
Fair Work Ombudsman Sandra Parker has previously said that her office would seek to use more compliance notices instead of penalties, as a means of helping employers to do the right thing and not punish them for making honest mistakes.
Maja Garaca Djurdjevic is the editor of My Business.
Maja has an extensive career as a journalist across finance, business and market intelligence. Prior to joining Momentum Media, Maja spent several years unravelling social, political and economic intricacies in Eastern Europe.