Australia: Small mistakes can have million dollar consequences
Employee Relations and Safety Update

A recent investigation by the Fair Work Ombudsman (FWO) has highlighted the importance of compliance with industrial instruments and manager training. The investigation into a retailer with over 30 stores in Queensland, New South Wales, South Australia, Victoria and Western Australia has led to the discovery that 877 employees were underpaid a total of $1.376 million between March 2006 and March 2010.

What happened?

An employee made a complaint to the FWO alleging underpayment. The retailer voluntarily reimbursed the employee who complained to the FWO however, during the course of the investigation, the FWO asked the retailer to conduct an audit to identify whether any other employees had been underpaid.

During the self-audit, the retailer identified a practice where employees in some stores were required to attend work without being paid. This occurred when employees were required to attend team meetings, or when employees were required to attend their workplace, before and after their rostered shifts without receiving payment. The employer identified underpayments totalling $1,376,281 over a seven year period.

The retailer has explained that the contraventions occurred due to a breakdown in management communication, which it has since sought to rectify through the provision of training and compliance manuals.

What were the consequences?

The retailer agreed to reimburse the employees who had been underpaid. The retailer also entered an enforceable undertaking with the FWO. Under the terms of the enforceable undertaking, the retailer was required to:

• reimburse all underpaid staff in full within two months
• send a written apology to all affected employees
• conduct a paid meeting to explain the contravention to all existing employees affected by the breach
• issue a memo to all employees, which is to be displayed in all stores and posted on the retailer's website for 30 days
• place an advertisement in The Australian in which the retailer will apologise for the breach and advise the public that it has taken corrective action
• ensure all store managers attend workplace relations training courses
• commission the preparation of a workplace relations compliance manual for distribution to all staff
• pay $120,000 to the Working Women's Centre Queensland to assist with the promotion of compliance with Commonwealth workplace relations laws
• report to the FWO on the pay and conditions of its employees at the end of each financial year for the next three years
• report to the FWO with details of the implementation of systems and processes designed to ensure ongoing compliance with workplace laws.

Key lessons for employers

The retailer has apologised for its breaches, which it says were inadvertent and the result of a failure in management communication. However, the cost to the business of rectifying these breaches was quite significant, especially in the current economic climate. This situation may have been avoided by the provision of training to managers on workplace relations laws and an overview of the rights and responsibilities of employers under the Fair Work Act 2009 (Cth), steps which the retailer is now required to undertake.

Employers should take a proactive approach to managing employment issues and to reduce their business risks through workplace training. Gadens Lawyers offers a range of customised training packages to meet the needs of organisations, including training on workplace relations laws and industrial instruments.

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This report does not comprise legal advice and neither Gadens Lawyers nor the authors accept any responsibility for it.