High penalties for underpaying workers

September 25, 2017

Amendments to the Fair Work Act have been introduced to protect vulnerable workers. These new laws seek to address the exploitation of workers who are deliberately and systematically underpaid.

These changes have been welcomed as a response to the highly publicised exploitation of workers by retail businesses such as 7-Eleven. Migrant workers have at times been paid well below the minimum wage, forced to hand back part of their wages in cash, and even to accept pizza and soft drink in wages instead of money they were entitled to.

Some of the key changes being enacted are:

  • Higher penalties – up to 10 times the current penalty for ‘serious contraventions’ of payment-related workplace laws where the employer knowingly and systematically contravenes the law. This includes depriving employees of their full entitlements under the Fair Work Act, falsifying records and failing to comply with record-keeping or payslip obligations.
  • Prohibition of ‘cash back’ schemes which unreasonably require employees to pay the employer part of their wages back. This has been extended to prospective employees.
  • Holding franchisors and holding companies that have a significant control over their business networks responsible for underpayments by their franchisees or subsidiaries where they knew or ought to have known of the contraventions and failed to take reasonable steps to prevent them.
  • Increasing the evidence gathering powers of the Fair Work Ombudsman to those held by ASIC and ACCC to ensure contraventions can be effectively investigated. The Ombudsman will be empowered to compel a person to provide information or answer questions. Providing false or misleading information, or hindering or obstructing an investigator is prohibited.

Employers should be mindful that they are paying their employees at least at the minimum required under the National Employment Standards or the relevant modern award that would cover their employee. Please note that you cannot “contract out” of minimum standards set by the law.

If you have any queries in relation to the above, please contact our Employment Law Team.

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