A landmark court case to be heard later this year will test a key assumption about employment records that could be used to convict businesses of wage underpayment, a law firm has said.
In a post on its website, law firm Macpherson Kelley said that the case revolves around a legal change introduced by the federal government in 2017, one which was designed to protect vulnerable workers.
“In 2017, the federal government amended the act [Fair Work Act] by making a number of changes intended to protect vulnerable workers. The effect of one such change is that, where an allegation of underpayment is made and the employer has failed to keep records required by the act, the court will presume that the employer has, in fact, underpaid its workers, unless the employer can prove otherwise,” the post said.
“This particular amendment was introduced after a number of high-profile businesses, such as 7-11, Caltex and Dominos, avoided penalties for underpayment of wages through the destruction or absence of employee records and payslips resulting in insufficient evidence for prosecution.”
The test case involves the Fair Work Ombudsman against A&K Property Services, which the law firm said will be heard in the Federal Circuit Court later in 2019.
“The case concerns nine workers who were allegedly underpaid a total of $19,476 in entitlements under the relevant Award, including minimum ordinary hourly rates, weekend penalty rates and overtime rates,” said Macpherson Kelley.
“The company, which operates two sushi outlets, was issued with a notice to produce records by the Fair Work Ombudsman. However, its directors claimed it did not keep the requisite employment records or payslips and instead produced ‘reconstructed’ documents.
“The company now faces penalties of up to $63,000 per contravention, and its three directors each face penalties of up to $12,600 per contravention for their alleged involvement.”
In October last year, the Fair Work Ombudsman revealed it had audited 45 sushi businesses across three states, recouping almost $800,000 in wages for just under 400 workers.
According to Macpherson Kelley, the outcome of the regulator’s legal action in this instance will, if successful, provide important lessons for employers.
“Previously existing loopholes which enabled employers to avoid penalties for underpayment are now closed. Businesses that don’t meet record-keeping or payslip obligations without reasonable excuse are at a higher-than-ever risk of liability under the act,” it said.
The law firm added the case highlights the importance of employers understanding the type of records they are required to retain, and for how long, in order to avoid potential liability.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.