An organisation has been ordered to pay a fine for failing to pay an employee accurately over a two-week period.

Enterprise agreements give employers and employees the freedom to bargain for better working conditions, flexibility and wages to suit their individual needs beyond a Modern Award. But, if employers are not careful, they can find themselves exposed to orders for compensation and pecuniary penalties for contraventions of an enterprise agreement or other applicable industrial instruments. 

Given the risk of significant penalties, employers must ensure compliance with the terms set out within enterprise agreements covering their employees. 

What are enterprise agreements?

Enterprise agreements are an agreement made at the enterprise level between employers and their employees which contain terms and conditions of employment, including wages.

Three types can be made under the Fair Work Act – single enterprise agreements, multi-enterprise agreements (agreements which the new Fair Work Legislation Amendment (Secure Jobs, Better Pay) Bill 2022 seeks to increase the uptake of) and Greenfields agreements. 

In contrast to Awards, which cover minimum pay and conditions for a specified industry, enterprise agreements can cover specific arrangements for a particular company.

Enterprise agreements must leave award-covered employees “better off overall” than the relevant modern award. Enterprise agreements cannot offer less than is contained in the minimum standards provided by the National Employment Standards (NES).

Contraventions and penalties

When accessing a penalty for contravention of an enterprise agreement, courts will generally weigh up the nature and extent of the conduct, the amount of loss or damage it caused and the circumstances surrounding the contravention including whether it was deliberate. Weight is also placed on whether the contravention was the result of conduct from a member of senior management or at a lower level, and the size of the organisation.

In a recently decided case, a Victorian Public Health Service was ordered to pay a pecuniary penalty of $13,320 for contraventions of the Fair Work Act and the Victorian Public Health Sector (Health and Allied Services, Managers and Administrative Workers) Single Interest Enterprise Agreement 2016-2020. 

The organisation, which contended that the Court should order no penalty, or a penalty at the lowest end of the range of no more than $1000, was found to have committed two contraventions relating to a failure to pay an employee her wages across two weeks. 

The contraventions occurred when an employee, who had been off work on extended personal leave and WorkCover following complaints of bullying and harassment, provided the Victorian Public Health Service with a certificate stating they were fit to return to work at a site away from where the initial conflict took place.

A meeting to discuss the employee’s capacity to return to work was set for 12 October 2020, and it was during the period between 26 September 2020 and 12 October 2020 the employee was not paid in accordance with their enterprise agreement. 

In deciding on a penalty, the Court stated that the organisation’s decision not to pay the employee was deliberate, and as such, a significant penalty was in order. 

However, this was reduced due to the circumstances, the actual amount of loss to the employee, the fact it was a one-off contravention and because the contravention did not involve a senior manager. 

The Court highlighted that while there was a deliberate decision not to pay the employee, it was the result of a mistake rather than a disregard for the law – the mistake being that the Victorian Public Health Service was not aware the employee was entitled to be paid their wages from the date they provided their Certificate of Capacity.

How can employers ensure compliance?

Employers should obtain legal advice to ensure that the rights and duties set out in an applicable enterprise agreement are properly understood by all senior management and HR professionals. The provision of training and education in compliance is generally viewed as favourable by courts in promoting a corporate culture where contraventions do not occur. 

Where disciplinary measures are required, employers should be careful to conduct investigations in a reasonable manner that recognises the rights of the employee.

Sam Nottle is a Senior Associate at Jewell Hancock Employment Lawyers.

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