Fac­ing an Inves­ti­ga­tion by the Fair Work Ombuds­man — What is at stake?

It is not uncom­mon for employ­ers to face inves­ti­ga­tion by the Fair Work Ombuds­man (“FWO”) where for exam­ple, a dis­grun­tled employ­ee has com­plained to the FWO about a work­place issue such as a fail­ure to pay ade­quate wages or to meet award requirements.

Expe­ri­ence sug­gests that the reac­tion of employ­ers to the FWO’s involve­ment ranges from non­cha­lant and dis­mis­sive, to filled with trep­i­da­tion and fear. Often the employ­er’s reac­tion is informed by how seri­ous­ly they view their obligations.
This arti­cle looks at acces­so­r­i­al lia­bil­i­ty, the pow­ers of the Fair Work Ombuds­man and the sorts of fac­tors which may deter­mine how a work­place inves­ti­ga­tion pro­ceeds. It also looks at how the response of the employ­er to an inves­ti­ga­tion may impact on the even­tu­al outcome.

Acces­so­r­i­al Liability

In 2017 the FWO for the first time, used acces­so­r­i­al lia­bil­i­ty laws to obtain penal­ties against a pro­fes­sion­al ser­vices firm which was impli­cat­ed in help­ing one of its clients to exploit a vul­ner­a­ble work­er. The account­ing firm Ezy Account­ing was ulti­mate­ly penalised $53,880 after the Fed­er­al Cir­cuit Court deter­mined that it had been involved in var­i­ous con­tra­ven­tions of the Act by the employ­er. These includ­ed a fail­ure by the employ­er to pay: the min­i­mum hourly rate, casu­al load­ing, oth­er load­ings, pub­lic hol­i­day penal­ty rates, spe­cial cloth­ing allowance and also omis­sions to include pre­scribed infor­ma­tion on payslips. 

In a deci­sion hand­ed down in Novem­ber 2017 the Fed­er­al Court used acces­so­r­i­al lia­bil­i­ty laws to award a fine of some $21,760 against the HR man­ag­er of a New Shang­hai restau­rant in New South Wales for her role in facil­i­tat­ing wide­spread non-com­pli­ance of award require­ments includ­ing fail­ure to pay appro­pri­ate award rates. Her sub­mis­sions that she was fol­low­ing direc­tions giv­en by her boss were not sym­pa­thet­i­cal­ly received by the pre­sid­ing Judge, Jus­tice Bromwich, who found that the HR man­ag­er had act­ed in her own inter­ests ​“and know­ing­ly facil­i­tat­ing the exploita­tion of work­ers” and that ​“there is noth­ing wrong with send­ing the mes­sage that an employ­ee should indeed resign if that is the only alter­na­tive to con­tin­u­ing to par­tic­i­pate know­ing­ly in ille­gal activ­i­ty”.

Pow­ers of the Fair Work Ombuds­man to inves­ti­gate

Fair Work Inspec­tors may enter premis­es where they rea­son­ably believe that the Fair Work Act applies to the work­place in ques­tion and where records of doc­u­ments that relate to com­pli­ance (or non-com­pli­ance) are to be found. There are require­ments for the Fair Work Inspec­tor to iden­ti­fy them­selves by pro­duc­tion of their iden­ti­ty card. They can ask any­one to pro­vide an inter­view (with their con­sent) and seek access to doc­u­ments or records to be pro­vid­ed imme­di­ate­ly or with­in a spec­i­fied time­frame. Where they believe a con­tra­ven­tion has tak­en place they can require a per­son to pro­vide their name and address and rel­e­vant evi­dence in sup­port such as a dri­ver’s licence. 

In the course of inves­ti­ga­tion a Fair Work Inspec­tor can issue a Notice to Pro­duce Records or Doc­u­ments which requires a per­son to pro­vide such doc­u­ments with­in a spec­i­fied peri­od (usu­al­ly 14 days). It is a con­tra­ven­tion of the Fair Work Act not to com­ply with such a notice with­out rea­son­able excuse. That the doc­u­ments might incrim­i­nate a per­son is not a rea­son­able excuse for non-production!

Inten­tion­al­ly hin­der­ing or obstruct­ing a Fair Work Inspec­tor can attract penal­ties under the Fair Work Act sub­ject to cer­tain qual­i­fi­ca­tions such as rea­son­able excuse includ­ing that the Inspec­tor refused to com­ply with the require­ment to show their iden­ti­ty card. Pro­vid­ing false or mis­lead­ing infor­ma­tion in response to requests for doc­u­ments from a Fair Work Inspec­tor is unwise and can attract high penalties.

Options the Fair Work Ombuds­man has when they iden­ti­fy a contravention

A num­ber of options are avail­able to the FWO including:

• Issue of a Com­pli­ance Notice

• Issue of an Infringe­ment Notice

• The giv­ing of an enforce­able under­tak­ing by the wrongdoer

• Com­mence­ment of litigation

• Issu­ing of a Let­ter of Caution

• Refer­ral to small claims procedures

• Refer­ral to dis­pute res­o­lu­tion mech­a­nisms such as mediation

• No fur­ther action

A Com­pli­ance Notice is issued by a Fair Work Inspec­tor. It requires the employ­er to fix the breach of an Aus­tralian work­place law. The Notice explains what the employ­er needs to do to fix the breach, the time with­in which to fix it (gen­er­al­ly 14 days) and what hap­pens if they do not com­ply with the Notice. If the Notice is not com­plied with the FWO can take the employ­er to court and they can be fined. 

An Infringe­ment Notice is sim­i­lar to an on the spot fine. It can be issued by a Fair Work Inspec­tor to an employ­er who doesn’t com­ply with its record keep­ing and payslip oblig­a­tions. Infringe­ment Notices can be up to $1,260 for a breach by an indi­vid­ual and up to $6,300 for a breach by a cor­po­ra­tion. Infringe­ment Notices must be paid with­in 28 days. High­er penal­ties may apply if an employ­er choos­es not to pay the fine. If the fine is paid on time it is not tak­en to be an admis­sion of guilt and no fur­ther pro­ceed­ing can be tak­en for the alleged contravention. 

An enforce­able under­tak­ing is a writ­ten agree­ment where­by the employ­er under­takes vol­un­tar­i­ly to fix the issues iden­ti­fied by the FWO (e.g. rem­e­dy­ing an under­pay­ment, apol­o­gis­ing etc.). It also may involve a com­mit­ment by the employ­er to future com­pli­ance mea­sures such as reg­u­lar inter­nal audits and train­ing and future report­ing to the FWO. Enforce­able under­tak­ings if con­tra­vened can lead to the Fair Work Ombuds­man seek­ing court orders includ­ing orders for com­pen­sa­tion and any oth­er order the court con­sid­ers appro­pri­ate (ref s. 715 of the Act). Enforce­able under­tak­ings are often pub­lished on the FWO’s website. 

Fac­tors that influ­ence whether the FWO choos­es to com­mence litigation

First­ly there must be suf­fi­cient evi­dence to pros­e­cute the case. Sec­ond­ly it must be evi­dent from the facts of the case and all sur­round­ing cir­cum­stances that it is in the pub­lic inter­est to pro­ceed by way of lit­i­ga­tion. Real­is­ti­cal­ly, the FWO does not have the bud­get or the time to pros­e­cute every mat­ter. Gen­er­al­ly speak­ing the more seri­ous the ​“civ­il rem­e­dy pro­vi­sion” which appears to have been con­tra­vened, the more like­ly it is that this will sat­is­fy the pub­lic inter­est test.
Pub­lic inter­est fac­tors include:

1. The seri­ous­ness or oth­er­wise of the alleged con­tra­ven­tion. Con­tra­ven­tions involv­ing under­pay­ments of $5,000 or more in total are not gen­er­al­ly speak­ing thought to be triv­ial. How­ev­er con­tra­ven­tions involv­ing less than $5,000 in total may be con­sid­ered suf­fi­cient­ly seri­ous where for exam­ple there is under­pay­ments of vul­ner­a­ble work­ers or the employ­er is a repeat wrong­do­er. A fail­ure to com­ply with a Com­pli­ance Notice is anoth­er seri­ous mat­ter even if the quan­tum is less than $5,000;

2. The actu­al or poten­tial con­se­quences of the alleged contravention;

3. Preva­lence with­in the com­mu­ni­ty of the alleged contravention;

4. Mit­i­gat­ing or aggra­vat­ing cir­cum­stances. Where there is no evi­dence that the employ­er act­ed delib­er­ate­ly or reck­less­ly in under­pay­ing its employ­ees this will be a mit­i­gat­ing cir­cum­stance. Also where an employ­er sought advice con­cern­ing their oblig­a­tions from the FWO or a rel­e­vant pro­fes­sion­al and act­ed upon that advice, once again this will be a mit­i­gat­ing fac­tor. Co-oper­a­tion with the FWO to make admis­sions of con­tra­ven­tion, and work­ing to rec­ti­fy the con­se­quences and ensur­ing sys­tems are in place to avoid future con­tra­ven­tions will also be rel­e­vant to mitigation. 

Oth­er rel­e­vant fac­tors include char­ac­ter­is­tics of the alleged wrong­do­er which may for exam­ple include:-

1. The rel­e­vant com­pli­ance his­to­ry of the wrong­do­er (includ­ing their response to pre­vi­ous enforce­ment and pre­ven­tion activ­i­ties under­tak­en by the FWO);

2. The alleged wrong­do­er’s atti­tude includ­ing any proac­tive mea­sures they might have tak­en to ensure compliance;

3. There may be indi­vid­ual char­ac­ter­is­tics which will be rel­e­vant such as age, intel­li­gence, men­tal health and infirmity;

4. Also the size of the alleged wrong­do­er’s busi­ness may play a part includ­ing the extent of access to human resources expertise. 

5. Con­sid­er­a­tion may also be giv­en to whether the busi­ness will be able to con­tin­ue to trade if pro­ceed­ings are commenced.

1. The neces­si­ty to main­tain pub­lic con­fi­dence in the admin­is­tra­tion of com­mon­wealth laws.

More detail can be found about the Fair Work Ombuds­man­’s approach to these mat­ters in their ​“FWO Lit­i­ga­tion Pol­i­cy – GN1″

Increased penal­ties

The seri­ous­ness with which the Gov­ern­ment views com­pli­ance with work­place laws is reflect­ed in recent changes to the Fair Work Act which were intro­duced as part of the Gov­ern­men­t’s response to inci­dents of sys­temic under­pay­ment includ­ing the 7‑Eleven under­pay­ment scan­dal. The changes were intro­duced through the ​“Fair Work Amend­ment (Pro­tect­ing Vul­ner­a­ble Work­ers) Act 2017″.

The changes essen­tial­ly increase the max­i­mum civ­il penal­ties for cer­tain ​“seri­ous con­tra­ven­tions” so that for a com­pa­ny it is $630,000 per con­tra­ven­tion and $126,000 for an indi­vid­ual. A seri­ous con­tra­ven­tion occurs when a court finds that a per­son know­ing­ly con­tra­vened the rel­e­vant pro­vi­sion of the Act and that con­duct was part of a sys­temic pat­tern of con­duct relat­ing to one or more per­sons (s. 557A and s. 557B of the Act).

A per­son (the involved per­son) who is involved in a con­tra­ven­tion of a civ­il rem­e­dy pro­vi­sion by anoth­er per­son (the prin­ci­pal) com­mits a seri­ous con­tra­ven­tion of the pro­vi­sion if the prin­ci­pal’s con­tra­ven­tion was a seri­ous con­tra­ven­tion and the involved per­son knew that the prin­ci­pal’s con­tra­ven­tion was a seri­ous con­tra­ven­tion. This once again high­lights the need for pro­fes­sion­al advi­sors and HR staff of a rel­e­vant employ­er to be proac­tive, and if nec­es­sary take appro­pri­ate action in the event they dis­cov­er that the employ­er is engaged in a con­tra­ven­tion of the Act. 

Lessons for employers

Employ­ers sim­ply can­not afford to ignore the poten­tial­ly large penal­ties that may be imposed in the event of non-com­pli­ance with their oblig­a­tions under the Fair Work Act. Know­ing­ly engag­ing in sys­temic con­tra­ven­tion of the Act rep­re­sents a sig­nif­i­cant risk to the busi­ness. Employ­ers there­fore must take appro­pri­ate steps to ensure both com­pli­ance and mon­i­tor­ing of their oblig­a­tions and where appro­pri­ate obtain suit­able advice.

The Fair Work Ombuds­man has demon­strat­ed it is pre­pared to pur­sue per­sons oth­er than employ­ers where they assist in a con­tra­ven­tion. As not­ed above, they will pur­sue an organ­i­sa­tion know­ing­ly involved in a con­tra­ven­tion or indi­vid­u­als includ­ing not only direc­tors but also HR per­son­nel of the employer. 

The Fed­er­al Court has indi­cat­ed it will not be sym­pa­thet­ic to a response by an employ­ee that it was fol­low­ing direc­tions where the employ­ee know­ing­ly assist­ed in the con­tra­ven­tion. It there­fore may be the case that indi­vid­ual employ­ees whose warn­ings about non-com­pli­ance with the Act go unheed­ed by their employ­er, may be in the invid­i­ous posi­tion of hav­ing to choose whether to resign from their job or run the risk of expo­sure to sig­nif­i­cant penal­ties under the acces­so­r­i­al lia­bil­i­ty pro­vi­sions of the Act. 
It is impor­tant for employ­ers to recog­nise the breadth of options avail­able to the FWO when it inves­ti­gates, and the fac­tors which the FWO will take into account in deter­min­ing whether or not to engage in lit­i­ga­tion or oth­er­wise resolve the mat­ter. Whilst some are set above, it does no harm to empha­sise that the atti­tude of the employ­er and how it responds to work­place inves­ti­ga­tion is like­ly to play a sig­nif­i­cant role in deter­min­ing the future out­come of the inves­ti­ga­tion. Acknowl­edge­ment of non-com­pli­ance where appro­pri­ate, and a will­ing­ness to rec­ti­fy pre­vi­ous issues and ensure future com­pli­ance will go a long way towards mit­i­gat­ing the con­se­quences for the employer. 

The above also under­scores the impor­tance of seek­ing good legal advice at an ear­ly time.