Underpayments Remain a Priority for the Fair Work Ombudsman

Fair Work Ombudsman Sarah Parker has recently published the Priorities and Approach Statement for the 2020/21 financial year. The Statement sets out the FWO’s strategic priorities for the year ahead.

It is no surprise that the FWO’s main priority will be to support workplaces through the current COVID-19 pandemic and the recovery phase that will hopefully soon follow. But of the other priorities listed in the Statement, that which received the most attention by Ms Parker in her subsequent media release was the issue of large corporate underpayments to employees.

In the last year, there has been an unprecedented number of large corporations in Australia who have self-reported the underpayment of wages and entitlements to their employees over many years. This quickly became the primary concern in workplaces across Australia until the COVID-19 pandemic came along.

It has been revealed that more than 60 businesses have come forward to self-report breaches of workplace laws to the FWO, with underpayments totaling half a billion dollars. Many of these self-disclosures have been well-documented by the media, including companies such as the ABC, Qantas, Woolworths, the Super Retail Group (including Rebel Sport, Supercheap Auto and BCF), Bunnings and the Commonwealth Bank. As such, it makes sense that the issue of systemic underpayments remains high on the FWO’s list of priorities.

Evident in the Statement is the consideration that has been given by the FWO to the current economic downturn affecting many industries and sectors across Australia. The Statement provides the following:

“Regulating Australian workplaces significantly impacted by the COVID-19 pandemic requires a degree of flexibility in our [FWO] approach. We are mindful that our regulatory efforts should not negatively affect already struggling industries, while also being sensitive to the nuances of each sector and the challenges each will face when recovering from disruption.

Some of our priority sectors have been seriously impacted and are under considerable financial strain, including the fast food, restaurants and cafes, and horticulture sectors. We will take into account these circumstances and seek to reduce the regulatory burden associated with proactive compliance in these sectors and those similarly impacted.”

The FWO’s Compliance and Enforcement Policy has been revised to reflect this shifting attitude towards enforcement in the current climate. In respect to the issue of underpayments, it is interesting to note that the revised Policy states the FWO will take a “practical and proportionate approach to self-reported non-compliance”, and that isolated payroll errors resulting in underpayments over a short period of time (up to 12 months) do not need to be actively reported to the FWO, so as long as:

  • Employees are appropriately informed of the underpayment;
  • Employees are back paid in full as soon as practicable; and
  • Changes are implemented to ensure the error does not happen again.

The FWO’s definition of “isolated errors” over a “short period of time” is interesting, as many would agree that underpayments over a period of 12 months would seem to be a rather low threshold for self-reporting to the FWO. Nevertheless, businesses certainly should not view this as a “free pass”. Rather, these elements of the Statement and the Policy should be seen as a word of caution that although some leniency may be afforded by the FWO having regard to current economic conditions and uncertainty, employers’ compliance with their pay obligations and their immediate rectification of breaches (particularly in vulnerable sectors) remains of the utmost importance.

Addisons’ employment law team has assisted a broad range of clients manage their underpayment issues from start to finish. This includes managing payroll audits to quantify the extent of any non-compliance, effecting repayments to employees and implementing measures to prevent future non-compliance, and representing clients in investigations by the FWO.

If you are concerned about whether you have underpaid your employees in the past, or whether you have been underpaid by your employer, please reach out to Addisons’ employment law team.

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