A recent Enforceable Undertaking by a well-known currency exchange business highlights the illegality of “make good” deductions from employees and the risks arising from mistakes in determining Modern Award coverage leading to the underpayment of wages.

UAE Exchange has negotiated the avoidance of any legal proceedings against it by the Fair Work Ombudsman (FWO) by entering into an Enforceable Undertaking under the Fair Work Act 2009 (Cth).

The FWO prosecution resulted from a single complaint by one worker about wage underpayments (supplemented by two further employee complaints). These complaints grew into a full scale investigation of employee wages and deductions by the FWO, conducted over a three year period.

As a result of the investigation, UAE Currency was determined (and admitted) to have:

  • failed to pay the minimum rates of pay
  • failed to pay the casual loading
  • failed to pay the evening work penalty rate
  • failed to pay the Saturday penalty rate
  • failed to pay the Sunday penalty rate
  • failed to pay the Public Holiday penalty
  • failed to pay overtime penalty rates for permanent employees
  • failed to engage an employee for the minimum shift duration
  • failed to pay two employees their correct base rates of pay
  • failed to pay two employees their correct base rate of pay and leave loading during a period of annual leave
  • failed to pay two employees their correct base rate of pay during personal leave
  • failed to pay in full amounts payable to the Employees in relation to the performance of work
  • unreasonably requiring the Employees to spend amounts payable to them for the performance of work
  • failed to include, in payslips provided to Employees, information prescribed by the Fair Work Regulations 2009

Additionally UAE Currency was found to have engaged in the practices of paying flat rates of pay leading to the underpayments, and to making staff “make good” any cash shortages where the branch cash register did not tally with official receipt register details. Both practices were required to be ceased.

UAE Currency made rectification payments to the three complaining employees totalling just over $100,000. However the company was required to undergo a full audit for the period 1 January 2011 to 30 June 2017, which identified additional underpayments of $328,949.35 in respect of wages and $78,379.84 in respect of the “make good” deductions and associated superannuation shortfalls (which UAE Currency also repaid) in relation to current employees.

A complete audit for that same period for a further 177 former employees was also required. UAE Currency was required to make payments of any further identified underpayments, to subscribe to certain FWO programmes, and to make both private and public apologies for their conduct.

The overall shortfall in payments has been reported at $1,335,664 for 243 current and former employees, including some $170,000 in “make good” payments.

Finally, in addition to the required written apologies and compliance documentation required by the FWO, the company was required to pay up to $500 per employee owed in access of $20,000 to obtain paid financial advice and to pay an additional $60,000 in donations to local legal and community resource centres.

Lessons for Employers

This Enforceable Undertaking highlights for employers the dangers of:

  1. Failing to properly consider Modern Award coverage and employee classifications within the applicable award;
  2. Adopting a flat rate of pay without any or any adequate analysis of whether such means of payment adequately or properly compensates each employee after consideration of their particular roster/ hours and days of work; and
  3. Failing to properly investigate the causes of cash shortfalls and failing to seek lawful and appropriate ways of addressing same.

Given the Fair Work Commission has just completed a comprehensive four year review of Modern Awards and introduced a raft of major changes to those awards, it is very timely for employers to consider obtaining professional advice on:

  1. Modern Award coverage, including classification of workers within the applicable award;
  2. Rectification of any unauthorised deductions from employee wages and any shortfall in wages;
  3. Alternative means for identifying and addressing cash register shortfalls; and
  4. The availability and desirability of annualised salaries or an enterprise agreement in lieu of application of the applicable modern award.