Managers fined for illegally deducting “administrative fees” and “meal fees” in excess of $100,000 from employees’ wages
FWO v Oz Staff Career Services Pty Ltd & Ors (No.2)  FCCA 2594
A recent case in the Federal Circuit Court of Australia has found that managers may face serious penalties if they deliberately exploit their employees and provide false and misleading records to Fair Work Ombudsman inspectors.
In the case of FWO v Oz Staff Career Services Pty Ltd & Ors (No.2)  FCCA 2594, the Federal Circuit Court of Australia ordered the sole director of an organisation now in liquidation to pay $14,960 and the former HR manager to pay $9,920 in penalties after they were knowingly involved in illegally deducting “administration” and “meal fees” from their cleaners’ wages.
Between the period of December 2011 and May 2013, Oz Staff Career Services deducted $25 per week in “administration fees” and made a further deduction as a “meal allowance”.
The former HR manager for Oz Staff Career Services was the “designated point of contact” between investigative officers and the company and on June 2012 he was told the company had been approached about deductions made to numerous casual employees.
On 4 February 2013, the CEO and sole director and the former HR manager was present at a meeting with the Fair Work Infoline regarding the deductions.
Oz Staff and the CEO and sole director of the company recognised the deductions to be unlawful and admitted their involvement.
The former HR manager conversely argued the deductions were not a contravention of the Fair Work Act 2009 (Cth).
Oz Staff Career Services were asked to present payment records to the Fair Work Ombudsman during the investigation. Although records were produced, they did not record the administration fee or meal deductions and were not the “true” records.
The deductions were a breach of section 323(1)(a) of the Fair Work Act 2009 (Cth).
The Federal Circuit Court of Australia found the sole director and CEO of Oz Staff Career Services was “at all relevant times in total control of the first respondent” and was liable for the contraventions.
The Court found the non-admission by the former HR manager regarding the deductions was “misguided” given the company and the CEO had recognised they were unlawful. Further, the Court found the former HR manager would have known of the deductions by at least the meeting on 4 February 2013. The Court stated, “a person who knows of the contravention and takes no steps to correct it is clearly in some way, at least indirectly, a person who has” breached section 550(2)(c) of the Fair Work Act 2009 (Cth).
Further, the company failed to keep accurate pay records, altered them and provided false and misleading records to Fair Work Ombudsman inspectors in breach of regulations 3.44(1), (4) and (6). The Court did not accept that the former HR manager, being “intimately involved … with Award matters was not aware not only that the deductions were being made but that the recorders which were forwarded to the applicant showing those deductions were false and misleading.” It was also noted that the former HR manager delivered these false documents to the Fair Work Ombudsman investigators. As a result, the former HR manager was found to have breached section 550 of the Fair Work Act 2009 (Cth) in regards to the pay records.
The Court noted that the deductions were in excess of $100,000 and the affected employees were in an industry where “employees are lowly paid and open to abuse”.
The Court also noted the sole director and CEO had, in the past, been involved with another entity that was subject to complaints in 2006 and 2010 about deductions in administrative fees. The CEO was also, at the time of the hearing, involved in another business in “something remarkedly similar to the activities of [Oz Staff Career Services]”.
The former HR manager had not been subject to any prior contraventions.
The Court noted any signs of corrective action and contrition by the CEO and/or the former HR manager. Oz Staff Career Services did cease the unlawful deductions and sought to reimburse the underpaid employees. These employees were also sent letters of apology, prepared by the former HR manager, and signed by the CEO.
The Court ordered the CEO to pay 85% of the maximum penalty that could be imposed and the former HR manager was ordered to pay 40% of the maximum penalty. This resulted in $14,960 and $9,920 being paid respectively.
This case demonstrates that businesses and managers can face serious penalties if they are deliberately exploiting their employees.
* PCC Lawyers are a team of employment practitioners based in Sydney, with many years of combined knowledge and experience in workplace law, industrial relations, workplace investigations and training. They provide a high standard of excellence and an exceptional level of personal service to a variety of clients in the Sydney metropolitan area, Central Coast, regional NSW and interstate.