The Federal Circuit Court has fined a hairdressing chain over $70,000 for underpaying a young apprentice more than $8,000, following proceedings commenced by the Fair Work Ombudsman (FWO).


Implications for employers

Employers must be aware of their obligations under modern awards and the Fair Work Act (FW Act). It is important that employers are in control of internal book keeping and that appropriate records are kept, particularly regarding employees’ wages and entitlements. Misinformation is not an acceptable excuse for underpayment, nor is the lack of a dedicated human resources department.

Background

The FWO commenced proceedings against Cuts Only The Original Barber (the Company) and its two directors, Mr Paul Mark Salter and Mr George Dimaris (the Directors), after Ms Sarah Bejjani, an apprentice at the Company, made a complaint of underpayment to the FWO.

Ms Bejjani was employed on full-time basis by the Company whilst completing her hairdressing apprenticeship. It was alleged that, in breach of the FW Act, the Company failed to pay Ms Bejjani the required minimum rate of pay, correct penalty and overtime rates, annual leave loading and accrued annual leave upon termination. In total, Ms Bejjani was underpaid $8,625.71.

Ten previous complaints had been made against the Company to the FWO by other employees over a six year period. In addition, in the second year of her hairdressing apprenticeship, Ms Bejjani made a complaint to the FWO alleging she had been underpaid. This complaint was settled for $2,000 in 2011.

Decision

Among other things, Justice Riley of the Federal Circuit of Australia held that;

  • despite the Directors arguing that they believed they could pay Ms Bejjani based on her competency, the breaches were deliberate. It is incumbent upon employers to accurately determine their employee’s entitlements. A lack of a dedicated human resources department is not an excuse for contravening laws providing for workplace entitlements;
  • senior management’s close involvement in the breach should be considered in determining the appropriate penalty;
  • the combination of Ms Bejjani being an apprentice and being 21 years old was sufficient to make her a vulnerable employee; and
  • it was necessary to impose a penalty as both a general and specific deterrence, particularly given the number of previous complaints against the Company and the need to send a message to the wider hair and beauty industry that it is not economic to underpay workers.

Justice Riley provided a 20% discount for the employer’s cooperation and corrective action, but noted the Directors’ lack of contrition. The Company was ordered to pay penalties in the sum of $50,160 and each director was ordered to pay penalties in the sum of $10,032.