HRM reviews recent cases of non-compliance from the Fair Work Ombudsman.

A lot of the work the Fair Work Ombudsman (FWO) has highlighted this year is around smaller employers either lacking the proper education, or deliberately behaving in a non-compliant way to their own advantage.

But where things get more interesting are the cases of organisations that do have HR departments finding themselves wrapped up in wage scandals nevertheless. They demonstrate the dangers of outsourcing, and the perils of a franchise model.

Ignorant and/or dodgy employers

Recent campaigns from the Fair Work Ombudsman recovered more than $620,000 for hundreds of workers in the Victorian regions of Dandenong and Warrnambool – Otway Ranges. Among the businesses that weren’t compliant was a sheet metal manufacturer who underpaid 16 non-English speaking casual workers.

In a different case from February, a plumbing company was penalised $100,000 – and its owner $21,000 – for underpaying a 20-year-old worker for three months. The harsh fine is tied to the conduct of the employer who, when texted by the employee about outstanding pay, wrote back “Seriously, f*** off. When I’m ready.” There were other dodgy things going on, including promises of an apprenticeship that wasn’t formally registered.

In a separate Victorian case a former economics professor, who was already on notice for being breach of workplace laws, was paying workers as little as $10 an hour. The young overseas employees were on 417 working holiday visas, making them particularly vulnerable. One of them was working full-time six or seven days a week. On top of having to pay back the employees the owner is facing penalties of up to $10,800 per contravention.

The danger of outsourcing

An inquiry into the cleaning contractors hired by Tasmania’s Woolworths’ supermarkets revealed that 90 per cent were not complying with workplace laws. The chain, which obviously has an HR department, did not commit any breaches itself. But the Ombudsman has recommended Woolworths commit to back-paying the unpaid cleaners.

“While it is primarily the direct employer’s responsibility to ensure its workers are receiving their proper entitlements, once again I must emphasise that responsibility in a supply chain involving vulnerable workers goes all the way to the top,” says Fair Work Ombudsman Natalie James.

Part of the issue seems to be that while Woolworths failed to adequately monitor contractors to ensure things like its auditing policies were followed, the cleaning performance of contactors was regularly checked and scored.

HRM has written about the dangers HR faces when outsourcing is mismanaged, and about the benefits of getting “proof of compliance” around procedures and processes.

High tech payroll, low tech wage theft

7-11 cases have already generated more than a million dollars in penalties, so it makes sense why the head office set up  fairly sophisticated payroll technology in 2016. They instituted a biometric system to scan employees fingerprints when they signed in and out of the store, so as to ensure correct hours were lodged and correct payments processed.

But a franchisee in Melbourne tried to outsmart the system by demanding three workers drop off some of their pay in an in-store safe box. Over a year almost $7,000 in wages essentially went unpaid. The Ombudsman has commenced legal action against the company who owned the 7–11.

The end of a franchise

Another case involving a larger organisation was highlighted in March. Only one quarter of Caltex franchises were found to be completely compliant with Fair Work laws. While most were guilty of bookkeeping issues, more than a few were engaging in things like underpayment and non-payment.

What makes it worse is that much of the bookkeeping was so bad, the Ombudsman is fairly certain they haven’t recovered all workers’ wages. From the FWO website: “the agency believes the figure would be higher if underpayments could have been accurately calculated, but with so many deficiencies in the outlets’ records it is impossible to be sure of the true extent of the wage rip-offs.”

Earlier this year Caltex decided to transition out of a franchise model, largely because of the wage scandal that has plagued it for more than a year.