Care organisation and director penalised for underpayment of employees

The Office of the Fair Work Ombudsman (FWO) has announced that penalties totalling $41,580 have been imposed on the operators of a respite and care facility in Sydney, for deliberately underpaying two disability support workers a total of $84,450. This comes on the back of a Western Australian home-care services organisation having to back-pay foster carers more than $6 million, under a Court-Enforceable Undertaking with the Fair Work Ombudsman in December 2019, after self-disclosing that it underpaid 124 current and former employees.

Complaint referred to the Federal Circuit Court

In the recently determined matter, the Federal Circuit Courtfined Lovely Care Pty Ltd $36,000 and its director, secretary and shareholder$5,580 for her involvement in Lovely Care’s underpayment of the workers.

The employees were recent migrants to Australia at the time they were underpaid and were regarded as vulnerable workers under the 2017 vulnerable workers amendments to the Fair Work Act 2009 (Cth) (FWA). The staff members were paid flat rates of $200 to $312 for shifts of at least 15 hours. The payments were insufficient to cover the employee’s minimum hourly rates, casual loadings and applicable allowances under the relevant Award.

The employees lodged complaints with the FWO, leading to an investigation which identified that one employee was underpaid $54,115 and the other was underpaid $30,335. The FWO commenced legal proceeding in 2013 against the organisation and the Director, alleging both breached the FWA.

The FWO reported that shortly before a trial was due tocommence in November 2015, the employer admitted all the alleged contraventionsand rectified the underpayments with interest, but the Director deniedinvolvement in the contraventions. The parties agreed that the Director wasultimately responsible for Lovely Care’s decisions in relation to the terms andconditions of the employees’ employment.

Court finding

The question considered by the Federal Circuit Court was whetherthe Director could be held personally liable as an accessory for Lovely Care’sadmitted contraventions. The Court considered that the “essential facts” in thecase were:

• the Employees’ casual employment with LovelyCare during the periods alleged;
• the hours that the Employees worked;
• the ordinary time rates, casual loadings andsleepover allowances the Employees should have been paid;
• Lovely Care’s failure to pay the Employees theirfull ordinary time entitlements;
• Lovely Care’s failure to pay the Employees acasual loading; and
• in the relevant period, Lovely Care’s failure topay the Employees a sleepover allowance for the nights they slept at thecottage.

The Court found that although the Director swore that shewas not responsible for payroll, rosters or paperwork, it was apparent that sheknew the hours which employees worked and what they were paid for their work.Her evidence was that although she did not process the pays, throughout theemployee’s employment she was the one who processed all the timesheets for payrollpurposes. The Court further found that all relevant times, the Director “knew:

• the hours the Employees worked; and
• what the Employees were being paid for thatwork;
• so at the material times she knew the essentialfacts which constituted the contraventions, in the sense that she knew thefacts which showed that the Employees were in fact:
• being underpaid ordinary time rates;
• not being paid casual loadings; and
• not being paid sleepover allowances.”

The Court found that it was clear that the Director’s “involvementin payments to the staff, being the person ultimately responsible for theorganisation’s decisions in relation to payments made to the Employees,demonstrated that she was an intentional participant in the contraventions.”

After the decision was released, the Fair Work Ombudsmanmade a statement to the media:

“Migrant workers are some of the most vulnerable to underpayments in the community as they often have a limited understanding of workplace laws. Unfortunately, some employers take advantage of this by paying them unlawfully low rates. This judgement should serve as a warning to employers who would exploit migrant workers that they will get caught and face significant consequences for their actions.”

Conclusion

The Fair Work Ombudsman has demonstrated that they willpursue matters to the full extent of the law where they have identified that employeeshave been underpaid and employers have failed to comply with their obligations,whether that failure is intentional or a lack of understanding of theiremployment obligations.

It is crucial that directors and managers in the disabilityand aged care sector are aware of and comply with their obligations under theirrelevant awards. A failure to do so could result in individuals being found tobe personally liable and have penalties personally awarded against them by theCourt.

If you are unsure of your organisation’s obligations to employees under the FWA, the relevant modern award or a workplace agreement, we can assist you to understand your obligations and assess the risks to your organisation. You can contact us on 07 3160 0010 or at michelle.cowan@nfplawyers.com.au .

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