Individuals can now be pursued for underpayment claims, court rules

If a senior HR leader is making decisions about payroll, then they could be named personally

Individuals can now be pursued for underpayment claims, court rules

In a landmark decision by the Federal Circuit and Family Court of Australia, a judge ruled “[i]n a proceeding being dealt with as a small claim procedure under s 548 of the FW Act, the Court has jurisdiction to make a compensatory order against a person involved in a contravention of a civil remedy provision.”

A decision that has far reaching consequences for employers Gabrielle Marchetti, in-house council, and principal lawyer at community legal centre at Jobwatch, told HRD. “This court decision is going to affect plenty of people who wouldn’t be within our typical catchment for community legal centres so it’s a far broader reaching decision.”

“Representing eight international students in underpayments cases ranging from $675 to $7,656, Jobwatch won the landmark case that means workers across Australia will now be able to ask the court for orders against third parties who were knowingly involved in underpayments in small claim proceedings which means workers can name the person who employed them as a third party,” said Marchetti.

“Too often, our clients in small claims matters have been hampered by having court orders made only against the employer and not against any accessories. This has allowed unscrupulous company directors to avoid liability, in circumstances where they might deregister the company or shift assets from the company to another legal entity and thereby make it impossible for our clients to get the money that was ordered to be paid to them.”

Read more: Are employers misdirecting workplace rewards?

In a stark reminder of the importance of legislative compliance, recently a string of large Australian companies have made front page headlines as errors in rewards accounting have resulted in significant financial consequences and reputational damage for the firms.

Marchetti is quick to point out that this ruling doesn’t just extend to company directors, people can list any person in the company that they believe was involved in the contravention.

“It has such far reaching consequences, some of the media coverage to date has focused on company directors being liable and I really want to point out that it’s potentially anyone, not just company directors, anyone who was involved in underpaying the employee,” said Marchetti. “It could be, if there’s a senior HR person who’s making all the decisions about pay and payroll, well it could be that person personally,” she continued.

Marchetti said that Jobwatch had several clients that were awaiting the outcome of this case before proceeding with their applications and the community legal centre has been actively seeking anyone who thinks they have been underpaid to contact them.

Read more: Can you fire a worker overseas? Australian legislation may still apply

What should employers do if they uncover underpayments?

Marchetti said that best practice would be to notify your staff of the discrepancy immediately and make arrangements to repay the shortfall as quickly as possible.

“The longer the employee has to wait and the more the employee has to beg and grovel to be paid the amount you owe them, the higher the chance is going to be that they will go ahead with some sort of court proceedings,” warned Marchetti.

“Obviously it will depend on the company’s assets and finances but from the employer’s perspective and certainly from an individual’s perspective, they need to minimise the chances of them being listed as a respondent any court proceedings, best practice is as soon as it is established that there has been an underpayment, is to quickly and as soon as possible rectify it.

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