Fair Work Ombudsman ramps up use of compliance notices as wage theft continues to dominate headlines

The Fair Work Ombudsman (Ombudsman) has more than doubled its use of compliance notices over the last 12 months. The watchdog reported that in the financial year of 2020 to 2021, it recovered over $148 million for over 69,735 underpaid workers. With underpayment claims continuing to dominate news headlines throughout the pandemic (think Woolworths and Qantas), and phrases like ‘wage theft’ being thrown around with increasing regularity, the Ombudsman’s increased activity and move away from protracted litigation should come as no surprise, and there is no better time for employers to take proactive steps to ensure they are compliant with modern awards and the Fair Work Act 2009 (Cth) (FW Act) as a precautionary measure.

However, a recent decision in the Federal Court [1] has also highlighted the need for employers to be prepared to deal with the regulator in an appropriate manner, if the situation arises. The Court heard that the Ombudsman had issued PEBS Group with a compliance notice requiring it repay approximately $8,000 owed to employees within one month. However, PEBS Group failed to comply with the notice in the required time, and the Ombudsman commenced court proceedings. Ultimately, the company was fined over $18,000, despite telling the Court that the ‘massive’  fine would ‘financially cripple’ them. In issuing PEBS Group the fine, Judge Riley said, “penalties need to be set at a level that ensure that employers generally do not treat penalties as a trifling ‘cost of doing business’.’’ Penalties issued to larger organisations are likely to be higher.

What is a compliance notice? What else can the Ombudsman do?

The Ombudsman is an independent statutory agency which has a central purpose of ensuring compliance with Australia’s complex industrial workplace laws and in particular, ensuring employees are paid their correct entitlements under the relevant modern award, and the FW Act. Put simply, the Ombudsman is Australia’s wage police. However, the Ombudsman is not solely interested in wage compliance. Fair Work Inspectors appointed by the Ombudsman may also investigate other matters, including:

• right of entry of trade unions;
• freedom of association;
• ‘sham contracting’ provisions and other avoidance activities; and
• industrial actions.

Like the police, the Ombudsman is afforded a range of legislative powers that extend further than many employers may realise.

Here’s what you need to know about the Ombudsman, and its powers under the FW Act. The Ombudsman can (in certain circumstances):

• enter a workplace (without permission) because it ‘reasonably’ believes:
  • that an employer has breached the FW Act or other industrial instrument;
  • that records or documents relating to compliance matters are contained within the premises;
• inspect a premise, interview a person (with consent) and take copies of any relevant documentation or records; and
• require a person to give over relevant documents of information relating to what it believes is a contravention (yes, even if that information is self-incriminating).

If, after all that, the Ombudsman reasonably believes an employer has breached an industrial instrument, it can issue on the spot fines.

In more serious cases, the Ombudsman can also:

• issue a notice to produce records or documents, requiring an employer to hand over any relevant information;
• issue a compliance notice, requiring that the employer repaid allegedly underpaid amounts within a certain period, and provide evidence of having done so; and/or
• commence legal proceedings seeking repayment of unpaid wages and penalties against businesses, and any individuals involved in the breach.

Failing to comply with any of the above compliance and enforcement activities can result in penalties being sought not just against the corporate entity, but against individuals as well. They can range up to $666,000 for separate legal entities, and up to $133,200 for individuals.

Accordingly, employers must be prepared to quickly recognise the appropriate and lawful use of the Ombudsman’s legislative powers, and take appropriate measures to ensure they are engaging appropriately, in a way that mitigates their legal risk. Employers should also be aware of when, perhaps, the Ombudsman is overreaching its legislative powers, and whether there are lawful grounds upon which to resist handing over documents or engaging with the Ombudsman.

What do I do if my business receives a compliance notice?

Seek advice from NRA Legal immediately.

Compliance notices often prescribe a date by which any alleged contravention must be rectified so time is of the essence.

It is essential that employers understand whether a notice has been validly issued and what the notice requires of them. Failing to comply with a compliance notice will accelerate further compliance and enforcement action by the Ombudsman, including court proceedings.

What else do I need to do?

The best way to prepare avoid dealing with the regulator is through implementing strong front-end processes to ensure all employees are paid correctly, under the correct award and classification.

With that in mind, the team at NRA Legal are hosting an interactive webinar on 4 November 2021, to assist employers with navigating the complex rostering provisions under the General Retail Industry Award 2020 and minimise their exposure to underpayments. You can register here. We’ll also be discussing everything you need to know about the Clerks—Private Sector Award 2020 on 17 November 2021.

Equally as important, front-end compliance, as demonstrated above, is the ability to quickly and appropriately deal with regulators if the situation were to arise. NRA Legal is launching a new, interactive webinar, where we will be discussing our top tips on how to deal with regulators, and avoid tying yourself up in lengthy and painful underpayment disputes. Register your interest for this session by emailing us at hello@nralegal.com.au.

If you are dealing with the regulator, or if you are simply minded to put in place appropriate safeguards to avoid contact the NRA Workplace Relations team on 1800 RETAIL (738 245).

[1] Fair Work Ombudsman v PEBS Group Pty Ltd [2021] FedCFamC2G 158 (18 October 2021).

By Sarah Morison and Lindsay Carroll, NRA Legal