A small business that underpaid an employee by about 30% over eight months has been fined $200,000 in court.

The court treated the breach as 10 separate offences and took into account the employer’s complete failure to take part in the proceedings. It also fined the director $40,000.

Facts of case

The employee was a 19-year-old warehouse worker, whom the court described as “young and vulnerable”.  He claimed he was underpaid for 10 of his 18 pay periods. When he queried his pay and other entitlements, and then said that his father would notify the Fair Work Ombudsman, he claimed that the manager cast aspersions on his attitude. He was also ordered to drive a forklift although he did not have the required licence to do so. The same day, the manager accused him of stealing from petty cash, after which he resigned. 

The court found that the employer’s actions of underpaying the employee and directing him to drive the forklift when unqualified were motivated mainly by a desire to cut costs.

Decision

The court found that the combination of underpayment and being forced to operate a forklift when unqualified amounted to constructive dismissal, but not “adverse action” as defined in the Fair Work Act.  

The employer committed 10 separate breaches of the Act, including underpaying wages, not issuing pay slips (considered a particularly serious offence), and not paying public holiday wages and penalty rates, an amount for untaken annual leave, and superannuation contributions.

The penalties were $200,000 for the organisation and $40,000 for the director, whom the court said was well aware of what was going on and therefore involved in the breaches. The employer also had to pay about $8100 to the employee to cover the underpayments.

The bottom line: This case shows that courts sometimes come down very hard on employers that deliberately underpay employees. The penalties were 30 times greater than the amount “saved” by the underpayments.

It is also a reminder that company directors can be found liable for breaches as well as corporations. Thirdly, it highlights the importance of employers being aware of all the obligations they have to employees – not just avoiding underpayment, but compliance in relation to all the National Employment Standards. 

Read the judgment

Boyson v Centre Court Care Pty Ltd & Anor [2020] FCCA 229, 6 February 2020