Managing director denies involvement in employer's contraventions

Bubble tea company breaks rules in payments to over 150 workers

Managing director denies involvement in employer's contraventions

The Federal Circuit Court of Australia recently dealt with a case involving a company’s managing director who allegedly contributed to the employer’s contravention of award provisions. 

The Fair Work Ombudsman (FWO) argued that the employer failed to pay hundreds of its workers as required under the relevant award, and the managing director was a “person involved” in most of the violations.

While the employer admitted that it contravened specific workplace laws, the managing director contended that he was involved in the company’s violations. 

Background of case

The company “conducted a business of making and selling to customers a beverage known as ‘bubble tea’ for immediate consumption.”

From 8 August 2016 to 25 December 2016, the employer hired 152 employees to work at one or more of its branches. 

Based on a series of investigations by the FWO, the company allegedly failed to pay the workers certain payments that were obligated under the Fast Food Industry Award 2010 and provisions of the Fair Work Act. 

More importantly, the independent statutory agency claimed that the beverage company’s managing director was a “person involved” in the violation. 

First, the managing director was said to have adopted Costing Model B as the basis for paying the workers. This meant paying only the additional cost of minimum award rate plus uniform allowance, compared to the Costing Model A, which “set out the additional cost of paying the ‘minimum award rate, plus ‘uniform allowance,’ ‘casual rate,’ and ‘weekend penalty rate,’” the report noted. 

Thus, the FWO claimed that the managing director knew of the “system of non-compliance” in the workplace.

Following the FWO’s claims, the employer admitted that it failed to make payments under the applicable laws and rectified the underpayments. 

Meanwhile, the managing director denied the FWO’s allegations and said he was simply relying on the company’s former chief financial officer’s “advice and recommendations in implementing a non-compliant approach to the payment of staff,” the court noted. 

It has been shown time and again how upper management can take the fall when a company has been found to commit workplace violations. They can also suffer the consequences of improper workplace conduct that deals closely with trust and business confidence.

Court’s findings

The court emphasised that specific acts would constitute the managing director’s involvement in workplace contraventions. 

First, the managing director had seen the PowerPoint presentations, including the various fact sheets of costing models.

Second, the court found that the managing director accepted the financial officer’s recommendation to implement Costing Model B, which was the basis of the workers’ payments. 

Third, it allowed the same officer to complete the implementation of the model that caused the underpayments. And lastly, the director failed to take any action to change the method for paying the company’s employees. 

However, the court did not propose to make any final findings in relation to whether the managing director was involved in the relevant contraventions: “Instead, I propose to publish these reasons for judgment, and list the proceeding for directions some three weeks after the day I publish them to give [him] an opportunity to consider whether he wishes to elect to go into evidence.”

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