FWO v China Sanan Engineering Construction Corp [2013] FCCA 1177 (29 August 2013)

In an unusual twist, a foreign company that brought its workers to Australia temporarily has been fined by the Federal Circuit Court (Court) not for underpayment, but for not paying its workers what they were owed while they were in Australia.

In fining the company AUS$14,850, the Court explained foreign businesses and individuals who bring  workers into to Australia must actively inform themselves about Australian industrial laws and ensure compliance.

The Facts

In this case, 24 workers from China came to dismantle machinery the company had purchased. For several months in late 2009 and early 2010, the workers were paid their Chinese wage equivalent on a monthly basis, based on hours worked – between AUS$1.90 and AUS$6.75 an hour. However the workers were also entitled to an overseas travel allowance that amounted to an additional AUS$622 per week. This meant that overall the workers’ pay was higher than the then federal minimum hourly wage at the time of AUS$14.31. The problem was that the workers were only paid a small portion of the overseas travel allowance while they were in Australia, with the balance retained by the company until the workers returned to China.  

The Fair Work Ombudsman (FWO), who prosecuted the claim, argued the company breached section 323 of the Fair Work Act 2009 (Cth) in failing to pay the workers what they were owed monthly. The FWO told the Court that in failing to pay the workers their full wages, the company denied them an opportunity to enjoy the privileges usually associated with working in Australia. The FWO claimed the company was well-resourced and “sophisticated enough to discharge its legal obligations”.

The company told the Court it was a state-owned enterprise in which the Workers Congress held the ultimate decision-making power and the workers would therefore  “not exploit themselves”.  The company claimed it did not intentionally fail to observe Australia’s labour laws, and this was accepted by the Court.

However the Court found the company’s argument that the workers preferred to be paid their overseas allowance when they were home and so did not suffer a loss, carried “very little weight in relation to the imposition of a penalty”. Further, the Court noted translation difficulties were not a  “proper excuse for not taking steps to become informed about what Australian industrial laws require”.

Visa Issues

Significant to this case was the initial mistake made by the company in regard to the correct work visas for the workers. The company had incorrectly applied for subclass 456 visas, rather than subclass 457 visa. The company understood that under the 456 business visa, Australian labour laws would not apply to its workers. The company accepted that in hindsight, it was an error not to seek independent advice on this important point of the correct visa. While the Department of Immigration and Citizenship (DIAC) cancelled the 456 visas and the company was able to successfully apply instead for 457 visas (in early 2010), it is not known if DIAC took any action against the company for this mistake.

What This Means for Employers

The bar is set high for foreign companies and compliance with Australian labour laws.  Foreign companies must ensure they are taking positive steps to understand and fully apply Australian labour laws. A foreign company cannot rely on a defence of good intentions and translation issues to avoid penalties for non-compliance, even when they are new to doing business in Australia.