FWO Focuses on Hospitality Underpayment & Compliance Obligations

On 13 July 2020, Sandra Parker, the current Fair Work Ombudsman (FWO), announced the main strategic priorities for the 2020/2021 Financial Year are to address corporate underpayments and assist workplaces through the Covid-19 pandemic.

The priority to address underpayment of employees will focus on several specified industries, including the hospitality industry. This might seem harsh given the financial circumstances of the industry, the FWO is also mindful of the need to ensure workplace laws are complied with to protect employees in these struggling industries.

The FWO is seeking to provide education, advice, tools and resources to equip small businesses to understand their responsibilities. Additionally, the FWO has encouraged small businesses who may have underpaid staff to self-report and engage with the FWO early as this will be favourable if any action is taken.

However, for businesses who do not comply there is a growing trend for harsh penalties in the courts. Often in instances where underpayment occurs and the FWO chooses to investigate, a business will be issued with a Compliance Notice to remedy any fault by calculating and back-paying any underpayment.

A breach of a Compliance Notice risk being subject to heavy court-imposed fines. As was the case recently with the Old Cop Shop Eatery Pty Ltd (the Old Cop Shop), a Melbourne restaurant.

In October 2019 the Old Cop Shop was issued with a Compliance Notice requiring that it back-pay a former employee, along with interest, as a result of previous underpayments. The Old Cop Shop failed to comply with the notice.

On 10 July 2020, the Old Cop Shop was fined $22,050 by the Federal Circuit Court, in addition to being ordered by the Court to back-pay a former employer.

In this case, Judge Heather Riley commented that the contravention was ‘deliberate’ and specific and general deterrence was a “significant factor… given that the restaurant industry is notorious for underpayment to staff”.

By failing to comply, the Old Cop Shop was forced to pay a fine and had to make the back payment anyway.

While this case relates to a cafés and restaurants, all businesses need to be aware of their obligations in relation to employee wages and entitlements, including which Modern Awards apply. Importantly also, this case demonstrates the importance of following Compliance Notices issued by the FWO or immediately contesting them.

Our best advice is as always “do not just do nothing”. If you receive any correspondence from the FWO, the Fair Work Commission, or a Court, it is important to immediately seek advice and act on the correspondence.

We are able to assist in identifying and classifying wage payment levels and corresponding with employers, and employees, who may be involved in underpayments, contact us here.

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