Fair Work Ombudsman taking aim at Retail Award businesses

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Fair Work Ombudsman Enforcement Trends under the General Retail Industry Award

retail award

Analysis of the 2020-2021 Fair Work Ombudsman Annual Report suggests that Fair Work regards the underpayment of staff among Retail Award businesses a very serious issue.

This Annual Report indicated that there was a 20% increase in the amount of money recovered from the previous financial year, totalling to $148.4 million. It is fair to say that the Fair Work Ombudsman is increasingly more willing to enforce penalties against all employers for non-compliance, with more frequent investigations that are wider in scope.  

More specific to the enforcement of the General Retail Industry Award, the Fair Work Ombudsman will issue Compliance Notices to employers shortly after any allegation of underpayment is made.

Recently, the Fair Work Ombudsman has initiated litigation in Court against Australian Retail employers as a result of failing to action a Compliance Notice. Evidently, this approach demonstrates Fair Work Ombudsman’s willingness to stand up for employees to ensure equitable and just outcomes, as well as ensure employers uphold their legal obligations.

What does this mean for Retail Award employers?

The Fair Work Ombudsman takes compliance with the General Retail Industry Award very seriously to ensure that employees are receiving their entitlements at law.
If an employer does not abide by the pay rates in the Retail Industry Award, they risk receiving a hefty fine on top of the money that must be back-paid to employees as a result of underpayment.
This is intended to act as a deterrence mechanism for employers in order to fulfil their obligations, and an incentive to avoid significant financial outlay as a result of non-compliance. 

To understand the impact of the Fair Work Ombudsman’s approach to underpayment in the Retail Industry, it’s worth looking at some recent cases. An example is the Federal Court case Fair Work Ombudsman v Jenny Global Pty Ltd [2022] FedCFamC2G 472.

A former retail assistant was a migrant grocery store worker from Korea and received $12 per hour (well below that which was required under the Award), as well as small amounts of cash in hand during the months of January to May 2020. The employer also failed to provide payslips.
As a result, the employer was required to make a back payment of $8,860 plus interest for the underpayment of the hourly rate, as well as any casual loading, overtime, and evening and public holiday penalty rates owed under the Award. The Fair Work Ombudsman also secured $108,360 in penalties from the employer as a result of the underpayment and failing to action the Notice to Comply.

Is the Fair Work Ombudsman going to contact my business regarding an underpayment?

It is important for employers to know the different situations where the Fair Work Ombudsman can investigate possible breaches in the workplace.

Whilst the Fair Work Ombudsman does not investigate every single complaint, where a complaint involves very serious issues, is in the public interest and employees affected are more than one or are vulnerable, an investigation into that business will often go ahead. 

The biggest consideration before litigation proceeds is whether they have enough evidence, including if there is evidence of not complying with a Compliance Notice. 

It is important to note that the offence must have happened within the last six years for the Fair Work Ombudsman to conduct an investigation.

What are the possible outcomes of a Fair Work Ombudsman investigation?

Some requests that the Fair Work Ombudsman receives are resolved between the employer and employee amicably which is positive. 
This often happens when employers are responsive and tranparent for any documents and records requested by the Ombudsman. 

However, an investigation by the Fair Work Ombudsman may also result in Fair Work taking the employer to Court to seek a penalty for not doing what the law says and/or having employer back-pay their employees. 

Higher penalties also apply to serious contraventions. This is when there is a more serious breach of the Retail Award or any of the broader workplace laws in Australia (e.g. method and frequency of paying wages). 

In responding to Fair Work, what evidence is collected from the employer?

During this process, Fair Work Inspectors will try to collect evidence from employers. It is important to note that the Inspector is a Commonwealth authority and has the power to require employers to produce such documents through a Notice to Produce.

These documents include such as employment contracts, time and wages records among others. Not storing these records is often deemed non-compliance.

For example, if an employer has not kept a timesheet for every employee then there is no way of telling how much someone might be owed. This can mean they are liable to further offences under the Retail Award. 

What is a Compliance Notice? Why is it important?

If an employer does not respond to their Compliance Notice, the timeline from when a complaint is made by an employee to the conclusion of legal proceedings is very lengthy and onerous.

This is clearly evident in the case of Fair Work Ombudsman v 3 Rundle Mall Pty Ltd [2022] FedCFamC2G 354. A former casual retail assistant store worker made a complaint to the Fair Work Ombudsman for underpayment of wages, overtime rates and penalty rates under the General Retail Industry Award 2010 for work performed between November 2018 and August 2019.

After conducting an investigation the Fair Work Ombudsman issued Compliance Notices in 2019 and a legal proceeding concluded in Court in May 2022. This indicates an average time frame 2-3 years from investigation through to Federal Court orders. 

What happens if I ignore Fair Work?

Evidently, this is quite a long and burdensome process that has negative impacts for employers. This process is timely, costly and mentally exhausting.

As a business owner it can tarnish your professional and personal reputation. Long term it can affect your company’s profitability and staff retention.

Fair Work can also take individuals to court if they were ‘involved in’ the company’s contravention. A person involved in the company’s contravention may include:

  • * a company director
  • * a human resources manager or other manager
  • * an accountant
  • * a business involved in the supply chain.
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Ignoring requests for records and payslips also increases the burden you will face during litigation. This is sometimes referred to as “reverse onus of proof” and you will need to disprove all allegations in wage claims made in a court. 

You will have to actively find evidence to prove your case despite being a defendant and this can be an lengthy and exhausting process. 

What are the ‘blind spots’ for employers under the Retail Industry Award?

Informal agreements and unethical dealings

In quite a few recent cases there has been an emerging pattern where employers have taken advantage of employees that don’t speak English well enough to understand their employment rights. However, it is imperative that employers understand that the underpayment of staff or cash in hand for tax purposes is both illegal and unethical. 

In the long run not upholding legal obligations under a Modern Award will most likely result in the business being liable for serious financial penalties in the long run . The lesson here is that an employer’s legal obligation will always prevail over an attempt to exploit workers. 

Lack of records

Moreover, a lack of record keeping is also another cause for concern for employers that may  result in the underpayment of staff and non-compliance with legal obligations.

Having timesheet software that incorporates the rules of the Retail Award will greatly assist you in the management of work hours and payment of staff. At Fairtime we pride ourselves in assisting clients with all of their payroll compliance obligations. Our state of the art timesheet software is easy to use and incorporates all the rules of the Retail Award in order to assist employers. 

Staying ahead of changes to the Retail Award

Another challenge for businesses is keeping up with the changes that may be implemented into the General Retail Award each financial year. Once a year, there tends to be changes to the national minimum wage. For example, we saw a 5.2% increase on 1 July 2022. Additionally, another significant change under this Award was in regards penalty rates for casual employees working in the evenings. There have also been changes to rules about when part-time workers are entitled to overtime.

As an employer, knowing about pay rate changes when they occur is a critical aspect of being payroll compliant. At its heart monitoring legal compliance is  ensuring employees are receiving the correct rate of pay as well as additional entitlements like overtime and superannuation.

What can Retail Industry Award businesses do to ensure they are payroll compliant?

It is clear that there may be a gap in knowledge for many employers  in the context of the General Retail Award 2020. However, being proactive if you think you have an underpayment issue is the key takeaway.

If you ignore a potential payroll compliance issue then you will face the threat of a Fair Work investigation. If it comes to it you must action a Compliance Notice  from the Fair Work Ombudsman as soon as possible to avoid legal proceedings.

How can Fairtime assist employers?

There are many different avenues that employers can look at to avoid legal trouble, these include but are not limited to:

  • * Employing a payroll compliance team or outsourcing work to a payroll compliance expert
  • * Incorporating a reliable and accurate timesheets recorder into the business
  • * Seeking advice from a Retail Industry Award interpreter before employing a staff member to ensure they are paid at the correct level. 
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The latter point is particularly important as there are seven different levels under the Retail Industry Award, and each has a different pay rate. Fairtime Legal is able to assist you with these needs to ensure that you are compliant with the ever-changing requirements of the Retail Award. Implementing our software automates your payroll compliance for you and will save you having to employ staff to monitor payslips and timesheets every pay cycle.

 

Have more questions?

Underpayment is taken very seriously in the Retail industry.  So it is crucial that Retail employers are paying staff their correct entitlements and according to their specific job classification. This is where we can help. Fairtime’s “Level Checker” is a 3 min questionnaire that allows businesses and their staff to check their job classification and match it to their specific wage level. Click here to try it out today!

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