The Federal Court has imposed fines totalling $90,000 on a Sydney-based car wash company, its director and a senior manager over underpayment of award entitlements and incomplete employee records.

Crystal Car Wash (Crystal) operated car washes at over 10 locations throughout Sydney. During 2010 it engaged nearly 360 car wash workers, mainly young, unskilled and/or recent migrant arrivals with limited English.

The Fair Work Ombudsman (FWO) alleged that, with the knowledge of the director and the senior manager and displaying ‘gross irresponsibility’ in paying well under the award rates, Crystal ‘exploited’ this ‘vulnerable’ workforce through a complex web of corporate ‘labour hire’ arrangements including 24 companies to administer the ‘labour hire’ business, and underpaid those workers more than $180,000 in minimum award rates and/or overtime. By the time of the hearing, 13 of the labour hire companies had been put into liquidation.

When the FWO’s claims reached the Federal Court, Crystal admitted it was the employer and paid the $180,000 underpayments claimed in full. Crystal, its director and the manager responsible for payroll asked the Court to find that the payment amounted to cooperation, and to discount the penalty accordingly.

Justice Buchanan refused, finding that the respondents failed to show contrition, had been uncooperative during the FWO investigation, and that the complex corporate structures were a deliberate attempt to avoid legal obligations and conceal the true position and rights of the workers. The Court ordered penalties of $90,000 (out of a maximum range of $109,000), including a penalty of $9,000 on the manager responsible for payroll, continuing a theme of heavy fines handed down in recent times, such as:

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The sheer size of these penalties and the four year timeframe to reach a resolution are stark reminders of the significant risks for businesses that ignore or attempt to undermine minimum pay obligations.