The Government plans to up-size penalties and the Fair Work Ombudsman's powers, for wage abuse.

In the wake of the Fair Work Ombudsman's recent investigative activity into 7-Eleven and others, the Government has announced a new suite of workplace relations policies designed to clamp down on underpayment of workers, including within the franchising industry.

For example, the current scope of the accessorial liability provisions under the Fair Work Act 2009 (Cth) and its application to franchising arrangements is not entirely certain. However, the Government is set to introduce new offence provisions that capture franchisors and parent companies who fail to deal with worker exploitation by their franchisees, including underpayment of wages.

In addition, employers are set to face a ten-fold increase to the current maximum penalty for underpayment of workers of $10,800 for an individual (for example, a director) and $54,000 for a corporation. This has come at a time where recent decisions demonstrate that the courts are already willing to impose hefty penalties that far exceed the actual underpayment amount awarded. For example, in a recent decision of the Federal Circuit Court of Australia, record penalties were imposed on a 7-Eleven franchisee of $340,290, in circumstances where the owner and director of the franchisee was also ordered to pay penalties of $68,058 personally.

 Lessons for employers

  1. Employers should take steps to ensure that:
    1. they are satisfying the minimum obligations under the Fair Work Act 2009 (Cth), any applicable modern award and / or industry specific obligations, including in respect of minimum wages, penalties and allowances; and
    2. they are meeting the minimum statutory record-keeping obligations in respect of employee time and wage records, including to assist with any underpayment disputes and to respond appropriately to any request by the Fair Work Ombudsman, for those records.
  2. Directors and business owners may be held personally liable for the underpayment of wages, including in circumstances where that director or business owner:
    1. is responsible for deciding employee wages; and
    2. is 'knowingly concerned' in the underpayment, even if they did not know the employees had been paid less than the statutory minimum.
  3. Other costs which may be associated with any underpayment claim include bad publicity and associated reputational and brand damage, and possible downturn in trade, in addition to the imposition of penalties.