A recent decision of the Federal Circuit Court of Australia has demonstrated that the increased protections introduced by the vulnerable worker amendments to the Fair Work Act are being applied with real consequences for employers who underpay their employees and fail to keep proper employee records.

As we reported late last year, recent changes to the Fair Work Act 2009 (Cth) (FW Act) mean that employers who do not meet their record-keeping obligations and cannot give a reasonable excuse for the failure bear the onus of disproving wage claims before a court (see related article).

This amendment to the FW Act has now been utilised in the case of Fair Work Ombudsman v Pulis Plumbing Pty Ltd & Anor[1], where Judge Reithmuller of the Federal Circuit Court directed Pulis Plumbing Pty Ltd (Pulis Plumbing) and its director to pay substantial fines, in the amounts of $100,000 and $21,500 respectively, for breaches of the FW Act.

Lack of records contributed to employer’s liability

The Fair Work Ombudsman (FWO) prosecuted Pulis Plumbing for underpaying a second-year plumbing apprentice who had been employed by Pulis Plumbing on a three-month trial basis.

During the trial period, Pulis Plumbing paid the employee an apprentice salary but did not complete the registration requirements to enable him to progress his training. Because of this, the employee’s work with Pulis Plumbing did not count towards his trade qualification with the result that he was performing labouring duties at a reduced wage. In addition, at the direction of Pulis Plumbing, the employee undertook 201 hours of overtime and did not receive the various loadings to which he was entitled.

The employee’s real wage entitlement (set out in an enterprise agreement registered by Pulis Plumbing with Fair Work Australia) was five times what he had been paid.

Pulis Plumbing admitted that it had failed to pay the employee his legal entitlements and rectified the underpayments. However, during the course of the proceedings Pulis Plumbing failed to produce to the court any timesheets or records that could accurately determine the extent of the underpayment.

Judge Reithmuller noted that this type of obstructive behaviour was not uncommon for employers who sought to impede the investigation of their employees’ proper entitlements. Applying the recently introduced section 557C of the FW Act[2], his honour found that having failed to provide any employee pay records, Pulis Plumbing had the burden of disproving the employee’s assertions about the hours he worked and the payments he received.

Judge Reithmuller accepted as good evidence the employee’s diary entries recording the hours worked. He noted that Pulis Plumbing had no evidence upon which to challenge the employee’s records.

His honour concluded that Pulis Plumbing’s conduct represented an “outrageous exploitation of a young person” and that the protections afforded under the FW Act must be properly enforced against Pulis Plumbing and its director.

Records are non-negotiable

The case provides an insight into how the new vulnerable worker protections can be applied to redress the power imbalance between employers and employees to overcome some of the challenges faced by vulnerable workers.

As the case highlights, keeping accurate employee records is non-negotiable and a failure to comply with the record keeping provisions in the FW Act can have serious ramifications for an employer. Now, it is not only a breach to fail to keep the relevant records, a failure to do so can also be used to the employer’s detriment if an employee is claiming underpayment of wages.