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Business | Employment

Recent penalties for underpayment claims serve as a stark warning for employers

Failure to pay employees the minimum monetary entitlements (including wages, allowances or penalties) prescribed by a modern award can lead to the imposition of significant penalties for employers.

Recent penalties in underpayment claims highlight the need for employers to ensure they comply with workplace legislation and industrial instruments. We have seen the Courts willing to impose significant penalties, even in cases where employers have made seemingly innocuous errors which caused relatively minor underpayments.

Recently, in Fair Work Ombudsman v Cuts Only The Original Barber Pty Ltd & Ors, the Federal Circuit Court fined the employer $50,160 and each of its directors $10,032 for underpaying an apprentice approximately $8,000. In handing down its decision, the Court noted that it was important to send a message to the broader industry that failure to pay workers their correct entitlements is not acceptable.

Employers are not only at risk of the imposition of penalties – the Fair Work Ombudsman (FWO) can seek to enter into enforceable undertakings to remedy employee underpayments. In June 2016, the FWO secured its largest pay-back payment, after making an enforceable undertaking with a Victorian-based mining services company – it required the employer to reimburse $2 million to 205 underpaid workers and provide industrial relations training to all managers with HR and payroll responsibilities.

Employers need to continually assess employees’ minimum entitlements to achieve compliance and ensure they are not exposed to underpayment claims. We regularly undertake employee entitlement health checks to ensure that our clients are compliant.

"The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication."