Recent examples of worker underpayment include the widespread exploitation of workers in 7-Eleven convenience stores and of Pizza Hut delivery drivers, underpayment of Coles trolley collectors, and the Fair Work Ombudsman is currently investigating allegations that cleaners at the MCG have been underpaid tens of thousands of dollars.
HR professionals must exercise proper supply chain due diligence or risk financial and reputational backlash, says Mark Diserio, Partner at Lander & Rogers law firm.
Diserio says HR professionals must be aware of their specific obligations in relation to issues such as complying with minimum National Employment Standards, awards and enterprise agreements, and taking adverse action against persons, as part of Fair Work Act 2009
“Contraventions of these obligations are civil penalty provisions and may result in financial penalties of up to $10,800 for an individual and $54,000 for a corporation,” Diserio told HC Online.
He says HR practitioners can be held personally liable for such breaches and ordered to pay penalties of up to $10,800 per breach.
HR managers should ensure all sections of the supply chain are complying with the Fair Work Act obligations, because consequences for non-compliance can be have serious consequences for themselves personally and for their employer.
“As well as a fine for a breach, orders for back payments can be made up to a period of six years,” Diserio says.
“Such amounts may endanger the financial sustainability of a business so prevention is definitely better than the cure in these situations.”
The Fair Work Act contains provisions that treat a person who has been "involved" in a contravention in the same way as the person involved in the actual contravention, which is commonly known as "accessorial liability".
Under the Fair Work Act, the definition of being “involved in a contravention” is very broad. The main areas of accessorial liability are:
- sham contracting;
- underpayment or non-observance of provisions;
- adverse action and discrimination; and
- breaches of the National Employment Standards.
Diserio says HR professionals can conduct compliance audits of their organisation’s business dealings, however they first need to have a plan on how to deal with any issues that may emerge, to avoid being caught up in an accessorial liability claim.
He says HR professionals need to do their homework and conduct due diligence into the nature of the contractual arrangements between their company and its contracted workers.
He gives the example of a HR professional who is involved in a tender process where their company awards a contract to the lowest bidder.
“The fee structure makes it clear that your business will pay $18.50 per hour of labour provided. The modern award requires that employees performing this type of work must be paid at least $18.22 per hour,” Diserio says.
“Some months later, it emerges that the cleaning company has been incorrectly characterising its workers as contractors and paying them less than the modern award base rate,”
“The Fair Work Ombudsman prosecutes the cleaning company and you as a person involved. What's the problem?”
Diserio explains that in the above example, $18.50 is more than the award minimum but, given costs such as superannuation, payroll tax, and workers' compensation, it’s not enough even if no overtime and penalty rates ever become payable, and there’s no profit to the contractor on these figures.
“In this situation, HR would need to ask themselves if the contract was awarded to the lowest bidder without regard to how that company dealt with their staff, and if any assurance was sought about compliance with workplace laws – or if such a requirement was specified in the contract,” he says.
“As this example shows, an HR professional cannot be reckless as to the true nature of the contract or arrangement as this will not be a defence to accessorial liability,” he says.
“Nor is "turning a blind eye" to it. “
Diserio says the best position is to exercise sufficient diligence to avoid finding yourself in such a situation.
“If you find yourself in such a situation, you should seek independent legal advice,” he says.
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Some of Australia’s biggest corporate names are being linked to worker underpayment and exploitation cases and since employers and HR professionals can face hefty legal backlash, it is in HR’s best interest to ensure that all sections of the supply chain are complying with workplace law.