The Fair Work Ombudsman (FWO) has taken legal action against a takeaway food operator in regional Victoria after the business allegedly failed to comply with a Compliance Notice requiring it to rectify underpayments to a former employee. This case serves as a critical reminder for small business owners about the importance of meeting workplace obligations, particularly as new criminal laws for intentional underpayments take effect.

 

Understanding the Case

The FWO investigated the business after a former employee, who worked there between 2017 and 2022, requested assistance. It was found that the business had received JobKeeper payments on behalf of the employee in 2020 and 2021 but had not passed the full payments on to her. Additionally, the worker had been underpaid minimum wages under the Fast Food Industry Award 2010 and was owed annual leave entitlements.

To address this, the FWO issued a Compliance Notice in February 2023, instructing the business to calculate and back-pay the outstanding wages. However, the company did not comply. Now, the FWO is seeking penalties of up to $41,250 for the business and up to $8,250 for the director, alongside orders to ensure the underpayments are rectified.

This case highlights the serious consequences of failing to meet compliance obligations. The FWO has stated that businesses in the fast food, restaurant, and café sectors are a priority for enforcement, and non-compliance could lead to legal action, financial penalties, and reputational damage.

 

The New Criminal Underpayment Laws

As of 1 January 2025, deliberate underpayment of employee wages or entitlements is now a criminal offence. While honest mistakes won’t result in prosecution, businesses that knowingly withhold wages could face severe consequences, including fines, imprisonment, or both.

For small businesses, there are protections in place to help ensure compliance. The Voluntary Small Business Wage Compliance Code provides guidance to prevent unintentional underpayments, and cooperation agreements allow businesses that identify potential underpayments to work with the FWO to rectify them before legal action is taken.

 

What Small Businesses Need to Do

To avoid compliance issues, small business owners should:

  • Regularly review payroll systems to ensure employees are being paid correctly.
  • Familiarise themselves with industry awards, minimum wages, and entitlements.
  • Keep accurate records of employee payments and leave accruals.
  • Use the FWO’s free tools and resources, including wage calculators and compliance checklists.
  • Engage with the FWO early if they suspect an underpayment issue.

 

Key Takeaways

This case serves as a clear warning to small business owners: failing to comply with workplace laws can lead to serious legal and financial consequences. With the introduction of criminal underpayment laws, the risks of non-compliance are greater than ever. By staying informed, using available resources, and seeking professional advice when needed, small businesses can ensure they meet their legal obligations and maintain fair, compliant workplaces.

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