Underpayment of wages. What does it mean for you?

The 7-Eleven underpayment of wages scandal (that broke in August) revealed an issue that is common in industries where workers are vulnerable to exploitation or intimidation due to their age, immigration status and a variety of other factors. But not all underpayment is deliberate and systematic.

Australia’s complex system of laws, award and agreements can lead to employers (particularly small businesses) unintentionally underpaying their employees. This can have significant consequences. For employees it means living on an unfairly low wage. For employers it can mean serious penalties. In January this year the Fair Work Ombudsman fined a Launceston takeaway restaurant $100,000 for underpaying a Chinese chef on a 457 visa and creating false wage records. In June 2014 the Melbourne based La Porchetta restaurants that paid more than 100 young workers in pizza and soft drinks were fined $335,000 by the Fair Work Ombudsman.

So how can workers and employers guard against underpayments?

• Employers can use resources such as the Fair Work Ombudsman‘s online to PayCheck Plus to find out and calculate base pay rates, allowances and penalty rates (including overtime) based on modern award rates of pay.
• Employees can also inform themselves as to the correct rate of pay that applies to them and, if necessary, can make an Underpayment of Wages claim. There are a number of services that can help including: Young Workers’ Legal Service; Working Women’s Centre; the relevant union and, of course, our firm.
• Employees who have been underpaid can also make a complaint to the Fair Work Ombudsman. The Ombudsman can itself investigate complaints or suspected contraventions of workplace laws, awards and agreements.

Underpayment of wages claims are usually made in the South Australian Industrial Relations Court. An employee has up to 6 years from the date the amount was due to make an Underpayment of Wages claim. The process for making a claim is as follows:

• The employee lodges a Summons with the court Registry – attaching Particulars of Claim, which should set out clearly the details of the underpayment, what the employee is seeking and the grounds upon which the claim is made.
• The employer then lodges an Answer to the Summons, setting out to what extent the employer agrees or disagrees with the employee’s contentions.
• The next step is a compulsory conciliation conference. Both parties must attend and can be represented. The conference will usually be presided over by a Member of the Industrial Relations Commission and the purpose is to see whether or not the Applicant and the Respondent can resolve the matter by an agreement.
• If the matter is not settled after the conciliation conference, it will be set down for a Listing Conference by an Industrial Magistrate. This is a relatively short and informal hearing where the Magistrate will make whatever orders are necessary so that the parties are ready for the matter to go to trial.
• At the trial if the employee will have to establish the right to the money claimed. That will involve giving evidence and providing any supporting documents, such as copies of time books, and payslips.
• Each party has to pay their own legal costs, whether they win or lose.

If an employer is found to have underpaid staff it will be required to pay the money back and may also have to pay fines up to $33,000 per breach.

If you have any concerns about these issues or would like some further guidance, please call any member of the Johnston Withers’ employment lawyers team on 8231 1110.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.