As directors, business owners and those with key decision making responsibilities the management of staff comes with several difficult issues involving personal liability of directors. Underpayment of wages is one major factor and a number of clients have sought advice from NB Lawyers – lawyers for employers on undertaking an audit of the wages paid to staff to:
Here are 4 Major cases all employment lawyer for employers ensure their clients understand and are aware of:
First Case - Priority Matters Pty Ltd (Professional Services)
Priority Matters a patent application processing firm lost a major decision against the Fair Work Ombudsman which found personal liability for the directors. What is interesting in this case was that the directors were not involved in the day to day running of the operation of the business. The underpayments:
Although the reasoning for the “hold up” in payments was accepted – the Courts found that the following factors did not void the Directors from personal liability (and of course liability for the business):
The main point was that there were non-payments and the directors had knowledge of such. In practical terms, the intention and wilful ignorance may provide some basis to reduce liability, however the personal liability for directors exist all the same and directors must be across the prime issue of ensuring their staff are paid correctly and on time.
Second Case - Metro Petroleum (Petrol Station)
Metro Petroleum a petrol station operated in New South Wales and were owned by two (2) directors who amongst other things:
The Fair Work Ombudsman sought penalties against individuals involved in the breach and were successful in establishing personal liability of directors.
The employees at the centre of the underpayment of wages were visa workers who in the Courts view were being taken advantage of – this (alongside an liquidation prior to the case) lead to a greater personal liability of directors.
The Courts awarded $210,000 in penalties against the directors.
Third Case - Matcraft Pty Ltd (Manufacturing)
Matcraft was a manufacturer of automotive custom car mats.
The Fair Work Ombudsman with the assistance of an effected employee found breaches of the relevant modern award and an estimated $52,000 in underpayments.
As part of the discussion with directors, the Fair Work Ombudsman issued a compliance notice and for a period of time this was complied with. The compliance notice required repayment of the underpayment to the employee over a period of time, in practical terms a repayment plan.
However, after some time, the repayments ceased and it was found in evidence by the Courts that the directors made a concerted effort to utilise monies earmarked for repayments to be spent on products for the business.
The Courts took a very dim view of this thinking and did not view the directors actions to “see just how long they could continue” as positive in anyway.
This case really establishes a fundamental requirement that compliance notices need to be complied with – if you are not able to comply with the notice then this should be negotiated from the outset (or even renegotiated as it may be).
Penalties of $8,820 were levelled against the directors.
Fourth Case - Easttrac Pty Ltd and Klemtrac Pty Ltd (health and home care)
Major home care company, Eastrac and Klemtrac misidentified their workers as contractors as opposed to an employee.
As a result of the misclassification this led to non payment of leave entitlements.
$216,000 of penalties was awarded.
In addition, the personal liability of directors was also held and almost $15,000 was awarded against the directors for the breaches.
Bonus – Wage theft
Wage theft has also been criminalised and in particular Queensland and Victoria have led this change. Deliberate breaches of underpayment can lead to criminal sanctions for directors.
What steps should be taken?
Above is a snapshot of personal liability of directors when it comes to underpayment of wages. Our previous articles on underpayment of wages 3 Tips For Minimising Risk In Underpayment Of Wages and “We Have Never Had An Issue Before” – How Masterchef And Chatime Ha... and Top 3 Tips – Employers Can Avoid A $1.34 Million Underpayment Claim and How Employers Can Learn From 5,700 Employees Underpaid By Woolworth...
are quire helpful.
Best practice is to:
Unsure of any underpayment of wages? Has it been checked? Do you need definitive legal advice?
NB Lawyers – Lawyers for Employers undertake and offer an obligation free consultation – we are happy to help.
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