Recent Employee Under-Pay Cases Show HR Systems Are Critical

The Fair Work Ombudsman remains active with employee under-pay actions.
Three recent cases all involved self-reporting by the employers involved.
However, one is going down a different compliance pathway.

The three cases combined involve more than $12.8 million in underpayments. Two involved award interpretation issues and the other involved annualised wage scenarios.

Australian Unity and RSL LifeCare both self-reported under-payments and are being involved in “Enforceable Undertakings” by the FWO. Meanwhile, the Super Retail Group is going to court.

Court proceedings for SRG

The Super Retail Group self-reported under-payments in 2018 when it found that many annualised salaries being paid to staff were inadequate compared with what they would have been paid under the relevant Award, Agreement or National Standard. This month the FWO announced it is taking SRG to court based on a limited “sample” of under-payments involving more than $1 million.

A remediation program had been put in place earlier for the Super Retail Group but the FWO says it resulted in only a partial back-payment. Fair Work Ombudsman Sandra Parker said that the methodology used by the company to correct its past mistakes was itself faulty.

She said, “Every employer should be clear that if annual salaries do not cover all minimum lawful entitlements for all hours actually worked, the results can be substantial back-payment bills, plus the risk of significant court-ordered penalties. Penalties can also be higher for serious contraventions.”

“This is also the first court action where the Fair Work Ombudsman has alleged breaches by a holding company for contraventions by its subsidiaries. Holding companies who allegedly knew or reasonably should have known of underpayments within their group will be held to account,” Ms Parker said.

“We expect that holding companies have thorough governance measures in place to promote compliance across their subsidiaries, and that they act immediately to rectify any problems found,” she said.

Enforceable Undertakings for Others

The other two cases commented on by the FWO in December involved “Enforceable Undertakings” (EUs) that are serious but not as stringent as direct court action and penalties.

Australian Unity is an ASX-listed health care company and has back-paid more than $6.8 million to staff in Victoria and NSW. Under the EU the company has also paid a $250,000 “Contrition payment” on top of the back-pay but avoided court action.

The Fair Work Ombudsman said, “Between 2014 and 2021, employees were underpaid entitlements owed under 10 current and former enterprise agreements, two state awards and the Social, Community, Home Care and Disability Services Industry Award 2010.”

The payroll errors were identified during a proactive payroll compliance review by the company. Its review found various causes, including system and set-up errors; rostering and manual processing errors; incorrect interpretation of obligations; and inadequate training and payroll processes.

Fair Work Ombudsman Sandra Parker said an Enforceable Undertaking was appropriate in this case because the company had demonstrated a strong commitment to rectification.

She said, “This matter demonstrates why employers should prioritise workplace compliance and ensure their systems and processes meet all requirements of relevant Awards or agreements. Where breaches are not picked up quickly, they can lead to a substantial back-payment bill.”

The other case involved RSL LifeCare an aged care provider that has back-paid NSW and ACT staff more than $5m.

The payment errors were self-reported after a move to a new HR and payroll system highlighted the non-compliance. Incorrect pay rules were setup in the legacy systems, including rostering systems, leading to the errors.

The FWO stated that the majority of the underpayments involved RSL LifeCare failing to pay overtime rates in a range of situations where they needed to be paid, such as when employees had not had sufficient breaks between shifts and when part-time employees performed work on rostered days off but had otherwise worked less than 76 hours in a fortnight.

It also stated that another significant cause of the underpayments was a failure to provide shift workers with an extra week of annual leave they were entitled to. Some employees were also underpaid weekend penalty rates.
Fair Work Ombudsman Sandra Parker said that an Enforceable Undertaking was appropriate because the organisation had cooperated and demonstrated a strong commitment to rectifying underpayments, including devoting significant resources to engaging independent experts to oversee its rectification.

She said they have “committed to implementing stringent measures to ensure workers are paid correctly. These measures include engaging, at the company’s own cost, audits of its compliance with workplace laws over the next two years.”

The organisation is also required to provide FWO with evidence of systems and processes it has put in place to ensure future compliance, commission an independent organisation to operate a Hotline for employees to enquire about their wages and entitlements, and commission workplace relations training for human resources, payroll and rostering staff.

Rostering/PM Systems Need to be Compliant Too

These cases demonstrate the critical need for accurately setup award interpretation systems, including when annualised wages are being paid. It also demonstrates the need for other systems like those focused on “rostering” and “project management” to be integrated with compliant HR/Payroll systems and for these other systems to not accidentally trigger non-compliant practices.

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