31 July 2024
3 min read
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In recent years, many of Australia’s large employers have been the subject of scrutiny by the Fair Work Ombudsman (FWO). The FWO is responsible for monitoring compliance with the Fair Work Act 2009 (Cth) and the instruments made under that Act. Many of the investigations and prosecutions initiated by the FWO were the result of voluntary disclosures of significant underpayment of wages and other monetary entitlements.
The FWO has stated that voluntary disclosure is likely to reduce the prospects of enforcement action being taken in respect of underpayments. Aside from “isolated payroll errors resulting in underpayments over 12 months or less”, the FWO encourages self-reporting to ‘justify’ the FWO’s use of non-litigious and non-punitive compliance tools to resolve the matter.
In cases of large scale underpayments going back many years, the FWO will encourage the employer to accept an Enforceable Undertaking.
A recent example is Eagers Automotive Limited’s (EAL’s) $16.2 million back-payment to current and former employees for underpayments that occurred between 2013 and 2021.
EAL (formerly AP Eagers) is an Australian public company that operates automotive dealerships in all Australian states and territories, as well as in New Zealand. Following its acquisition of Automotive Holdings Group Limited (AHG) in 2019, EAL became Australia’s largest car dealership business.
In 2021, EAL self-reported the underpayments to the FWO after a review of its payroll following the acquisition, which found anomalies in relation to 19 AHG subsidiaries.
The self-report by EAL revealed a range of compliance failures. These included not paying employees according to award progression, incorrect employee classifications, unpaid overtime and leave, not paying for training, failing to pay employees (as required) when they were sent home due to no work, and making unauthorised deductions.
The current FWO, Anna Booth, highlighted that EAL’s:
"long-term breaches resulted from a lack of a consistent time and attendance system along with reliance upon manual paper timesheets, and a decentralised payroll system – plus a lack of awareness of workers’ legal entitlements.”
This failure led to significant underpayments and rectification costs for the company.
Ms Booth further emphasised the importance of proactive compliance and thorough checks for employers, stating that “large employers need to place a higher priority on having systems and processes in place that ensure employees’ full lawful entitlements are met, year-in, year-out.”
EAL has since entered into an Enforceable Undertaking with the FWO and has back-paid a total of $16.2 million to 13,277 current and former employees, which includes approximately $12.1 million in wages, $1.1 million in superannuation and $3 million in interest.
To prevent an issue from accumulating and leading to serious consequences over time, organisations should take several actions to review their compliance. These include:
Holding Redlich can assist you with reviewing your organisation’s compliance with awards and industrial instruments under a legal lens and instruct other specialists to provide you with the appropriate legal advice to manage and rectify any areas of risk exposure. If you have any questions, please get in touch with our team below.
Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
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