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Massive $125,000 fine in employment law ‘test case’

Federal Circuit Court

Lawyers had described it as a test case on whether employers are effectively guilty until proven innocent in terms of wages record-keeping. Now, the operator of two sushi outlets has been hit with a monster penalty in excess of $125,000.

In June this year, law firm Macpherson Kelley said the Fair Work Ombudsman prosecution against A&K Property Services, which operates several sushi outlets in Queensland, would test a 2017 legal change to the Fair Work Act.

“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 firm said in a post on its website at the time.

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On Wednesday (21 August), the Fair Work Ombudsman (FWO) issued a statement in which it claimed victory in the case following a ruling by the Federal Circuit Court.

“This is the first decision in a matter filed by the Fair Work Ombudsman under the Protecting Vulnerable Workers laws, which increased penalties for record-keeping and payslip breaches,” said ombudsman Sandra Parker.

“Accurate and timely record-keeping is a fundamental employment obligation and businesses are on notice to comply.”

Ms Parker added: “Workers have a right to rely on payslips to understand their workplace entitlements, particularly visa holders who may be vulnerable due to language or cultural barriers. We will continue to take court action to protect vulnerable workers, and anyone with concerns should contact us.”

Ultimately, though, the case did not set a new legal precedent on the “onus of proof laws”, the FWO said, because the business and its relevant directors had admitted liability.

What did the case involve?

The FWO launched legal action against A&K Property Services Pty Ltd, which operates two Sushi 79 stores in Queensland, one on the Sunshine Coast and the other in Ipswich.

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It claimed that audit activity had uncovered wage and super underpayments totalling $26,883, but also alleged the business had “failed to keep property time and wages records and failed to issue any payslips to employees”.

These underpayments, the regulator said, were to nine visa holders, all from South Korea, who were shortchanged anywhere between 7.69 per cent and 43.32 per cent of what they were legally entitled to be paid.

The prosecution was the FWO’s first under law changes made in 2017 that were designed to protect vulnerable workers, such as migrants and visa holders and young people, who may not fully understand or be aware of their legal employment rights.

According to the FWO, Judge Michael Jarrett had deemed A&K Property Services’ record-keeping breaches as being “particularly serious” offences.

“When an employer does not make and keep employment records, an effective safety net for employees is difficult to maintain and results in those employees being more vulnerable to exploitation. I am satisfied that the respondents’ conduct, whilst not deliberate, was plainly grossly reckless,” it quoted the judge as stating.

While the wage and super underpayments — which had accumulated as a result of a shortfall on both normal hourly rates as well as penalty rates, overtime and leave underpayments under the Fast Food Industry Award 2010 — have since been repaid, penalties worth $125,700 were handed down.

The FWO said the bulk of this was issued to the business, which was ordered to pay $108,000.

Meanwhile, director Yong Sin Kim was personally fined $10,600, while other directors Hyun Jun Kang and Jungpyo Lee were fined $3,550 each after they were deemed not to be involved in the record-keeping and payslip breaches.

‘Not as simple’ as guilty until proven innocent

Responding to the judgement, George Haros, principal lawyer at Macpherson Kelley, told My Business that while the “reverse onus of proof” was not ultimately needed in this particular case, “it will be interesting to see whether future cases will allow us to see how this evidentiary presumption is applied in practice by Courts”.

“The laws can apply in situations where inadequate records are kept or pay slips not issued. The reverse onus would have obliged the Court to presume that the employer had in fact underpaid its workers, unless the employer could prove otherwise,” said Mr Haros.

He said that the idea that employers are, under the law, essentially guilty until proven innocent is “not as simple as that”.

“The reverse onus imposes an obligation for employers to prove innocence, but it only comes into play in specific circumstances that are yet to be fully explored in court,” Mr Haros said.

“Fair Work Ombudsman Sandra Parker’s comment that ‘we will continue to take court action to protect vulnerable workers…’ is a clear indication that the FWO will continue [to] take advantage of these presumptions in pursuing employers who fail to keep proper records and meet their pay slip obligations.”

He added: “It’s likely the FWO will use the new presumption to obtain quick guilty pleas in cases which might otherwise have been contested. It means employers are on notice that they have to have their records in order, or face an increased chance of serious penalties.”

 

Adam Zuchetti

Adam Zuchetti

Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016. 

The two-time Publish Awards finalist has an extensive journalistic career across business, property and finance, including a four-year stint in the UK. Email Adam at This email address is being protected from spambots. You need JavaScript enabled to view it.

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Massive $125,000 fine in employment law ‘test case’
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