Fair Work Ombudsman Sandra Parker warns employers to “get their house in order” as regulator prepares for compliance blitz in the new financial year.

Very few would have been surprised to read about yet another case of underpayment this week, with three Tokyo Sushi stores in regional NSW owing 31 employees (mainly juniors and visa holders) over $70,000 in wages.

It’s definitely not the first time HRM has written about worker underpayments and it won’t be the last, but the the FWO’s new plans mean we should be writing fewer articles on the topic following a recent pledge to play hardball with compliance as we move into the new financial year.

Addressing the annual National Policy Influence Reform Conference in Canberra this Monday, Ombudsman Sandra Parker said, “It’s on us to send a strong message of deterrence to would-be lawbreakers”. She added that regulating Australia’s two million businesses and protecting 12 million workers is no easy task – and that’s true – but that doesn’t mean the previous actions have been good enough.

The regulator’s tough new approach follows criticism from the Migrant Worker Taskforce report which labelled the regulator’s approach as too soft. Professor Allan Fels AO – who chaired the taskforce along with Dr David Cousins AM – said the FWO risked being viewed as a mediator rather than a regulator and had taken too cautious an approach with enforcement.

The advice did not fall on deaf ears.

“Commissioner Hayne and Professor Fels both exhorted regulators to toughen up. A more complex and changing workplace environment indeed creates more opportunity for unscrupulous employers to evade detection. This is particularly the case if they employ migrant workers who often don’t want to rock the boat,” Parker said.

“Taking a firmer stance on non-compliance does not, however, give regulators licence to be draconian or irresponsible. The FWO still operates according to an enforcement pyramid that looks at the seriousness and deliberateness of the behaviour we regulate.”

You will get caught

The taskforce made 22 recommendations which were all accepted in principle by the Government. On 2 April 2019, the government announced additional funding for the regulator as part of the Federal budget – $9.2 million to be distributed over four years.

This money won’t just be used to bolster enforcement (although this is a high priority), educating vulnerable workers and influencing non-compliant industries is also on the regulator’s agenda.

Parker referred to a recent FWO social media campaign that utilised interactive infographics as one example of the education prong of its strategy. But change won’t happen overnight, she noted, it will take consistent, long term messaging.

“It took decades of repeated messaging for the dangers of cigarette smoking to take hold,” she said.

The FWO will use its new powers to publicly name employers who break the law in an effort to spread the message that “it is not acceptable to underpay workers or deprive them of their entitlements. Employers who do this will get caught.”

“If an employee comes to us and says they haven’t been paid and their employer is giving them the runaround, we have the power to compel records. If these records are deficient in some way, we can issue a penalty infringement notice, and if an Inspector forms a reasonable belief that there’s been an underpayment, the Inspector can issue a compliance notice.”

Parker says the regulator will simplify compliance notices to ensure employers’ responsibilities are crystal clear but sends a warning to non-compliant employers, “The Fair Work Ombudsman won’t resile from taking them to court to seek penalties”.

The FWO Compliance and Enforcement policy will soon be updated to reflect these changes.

Parker says the FWO now has five matters in the courts that were sparked by false and misleading information being provided to a Fair Work Inspector and that 176 compliance notices have been issued this financial year.

“Our most recent matter involves allegations of ‘serious contraventions’ and is the first where we have sought the new higher penalties, with maximums up to ten times higher than normal… employers now face penalties of $630,000 for a company and $126,000 for an individual per serious contravention.

“If we are successful in these matters, which I believe we will be, it will underline the strong message that underpaying workers and falsifying or failing to keep records will not be tolerated and penalties will be sought through the courts,” said Parker.

Setting the bar higher for bigger players

Noting that the Fair Work Act is not “light reading”, Parker sympathises with small business owners who mightn’t be across the entirety of their responsibilities, but says there’s no room for negotiating when it comes to owning up to mistakes, even for businesses that self-report non-compliance.

In a previous HRM article, we reported on the ABC’s case of self-reporting underpayments – not even our national broadcaster is immune from mistakes – but Parker says the bar should be set higher for larger, high-profile organisations.

She says the increase in cases of self-reported non-compliance is encouraging and probably a ripple effect from the Banking Royal Commission, but it’s “simply not acceptable for businesses to throw their hands up when they’ve been underpaying workers and expect to move on without consequences once the back pay is in the workers’ accounts.”

She says these employers should pay a contrition payment to reflect the seriousness of the situation.

“Our default position now is that an enforceable undertaking with the FWO will be required, as a minimum, and those enforceable undertakings will require the employer to meet the cost of getting their underpayments verified by experts contracted to the FWO, so that the burden of calculating what is owed is not put onto the taxpayer.”

A new set of priorities

In a bid to do better, the FWO has outlined its priorities for the 2019/20 financial year. Its new focus will include:

• Fast food, restaurants and cafes
• Horticulture and the harvest trail
• Supply chain risks
• Franchisors
• Sham contracting

Signalling that the regulator takes the issue of underpayment seriously, Parker offers a straightforward warning to employers.

“If you are in one of our priority industries, operate a franchise system or employ large numbers of migrant workers, you should expect to hear from us.”

This message is particularly pertinent to those working in FRAC industries (fast food, restaurants and cafes) which have rated as the highest ranking industries for disputes over the last five financial years. That’s one quarter of all of the FWO’s litigations and a third of its enforceable undertakings for that time period.

In her address, Parker said Prime Minister Scott Morrison and the newly-minted Minister for Industrial Relations, Attorney General Christian Porter (replacing Kelly O’Dwyer) have said adherence with Australia’s industrial relation laws and enforcement for non-compliant businesses are a priority for the new government.

“For anyone [who] considers our approach in those circumstances to be too tough, I can assure you that the consequences for those businesses that see a problem but don’t come forward will be far more significant,” warned Parker.