Compliance is a must: Employer and director ordered to pay penalties for failure to comply with compliance notice

The Fair Work Ombudsman (FWO) regularly engages in enforcement action for contraventions of the Fair Work Act 2009 (Cth) (FW Act). Such enforcement action includes issuing infringement and compliance notices, entering into enforceable undertakings or commencing litigation against companies and others involved in contraventions.

In the Fair Work Ombudsman and Registered Organisations Commission Entity Annual Report 2020-21 (the Annual Report), the FWO identified issuing compliance notices as its primary enforcement tool for underpayment matters.  Such was the FWO’s use of compliances notices that in the 2020-2021 period, 2,025 compliance notices were issued, compared to 952 in the 2019-2020 period.

Under section 716 of the FW Act, if a FWO inspector reasonably believes a contravention of workplace laws has occurred, a compliance notice can be issued. The person issued with the compliance notice must then take the action specified to remedy the contravention and produce evidence of their compliance. A failure to comply with a compliance notice is a civil remedy provision and the FWO can take court action to enforce it.

Recently in Fair Work Ombudsman v PEBS Group Pty Ltd [2021] FedCFamC2G 158, the FWO was successful in securing penalties against a business and its director for failing to comply with a compliance notice. PEBS Group operated as a business which sold advertising space in an online directory. It employed telemarketers and sales representatives whose duties included selling advertising spaces and managing accounts.

In September 2019, the FWO commenced an investigation into PEBS Group for breaches of the FW Act resulting in the underpayment of five employees. The FWO issued a compliance notice against PEBS Group for the contraventions of the Clerks – Private Sector Award 2010 and the annual leave and notice of termination provisions of the FW Act.

The compliance notice required PEBS Group to conduct an audit to calculate the amount of underpayment, rectify the underpayment and provide evidence to the FWO that it complied with the notice.

PEBS Group was required to comply with the compliance notice by 17 March 2020. However, it was not until 15 January 2021 (and after the FWO commenced litigation) that PEBS Group made payment to the five employees, and even then, there were still outstanding entitlements owing to one employee.

The FWO commenced litigation against PEBS Group for failing to comply with the compliance notice and also against the sole director of PEBS Group under section 550 of the FW Act for being involved in the contravention. The FWO sought declarations, orders for compliance and for penalties to be imposed for the non-compliance. 

PEBS Group and its director admitted that declarations and orders should be made however disputed the amount of the penalties to be imposed. The director submitted that a significant penalty would result in him being crippled financially.

In setting the penalties, the Federal Circuit and Family Court of Australia (the Court) had regard to:

  • the deliberate failure to comply with the compliance notice, given that the director was aware of the compliance notice and its requirements;
  • the non-compliance with the compliance notice for a period of 10 months,
  • the opportunity given by the FWO to rectify the breach which was ignored, which in turn required the FWO to commence litigation; and
  • the need to set a penalty at a level for both specific and general deterrence.

Accordingly, the Court ordered PEBS Group to pay a penalty in amount of $15,120.00 while the director was ordered to pay a penalty of $3,024.00.

Lessons for employers

The FWO has a range of enforcement mechanisms available to monitor and ensure compliance with the FW Act. Compliance notices are an alternative to commencing litigation however such notices must nevertheless be complied with. A failure to take the action specified in a compliance notice may result in further enforcement activities, including legal proceedings for which penalties may be imposed.

Shane Koelmeyer is a leading workplace relations lawyer and Director at Workplace Law. Workplace Law is a specialist law firm providing employers with legal advice, training and representation in all aspects of workplace relations, employment-related matters and WH&S.

02 9256 7500 | sydney@workplacelaw.com.au

Information provided in this blog is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this blog.

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