Fair Work Ombudsman targets directors

In a reflection of the growing trend for managers and directors to be targeted by the Fair Work Ombudsman, a string of recent cases have resulted in fines being imposed against individuals as well as the companies they run.

Those people in business who are responsible for ensuring that employees receive all of their legal entitlements will be feeling even less comfortable that they can rely on corporate structures to protect them from a breach of workplace laws. The Fair Work Ombudsman is now routinely prosecuting individual directors and managers in cases where they have been responsible for the underpayment of employees, and heavy fines have followed.

In DZ Imports, the FWO decided to prosecute the director of a company that underpaid two Chinese employees because of “the size of the underpayments, the employees were vulnerable and the employer failed to rectify the matter”. The director, a Mr Zhu, was fined $29,700 and his company was fined over $148,000. The total of the underpayments was about $21,000.

The FWO also reached a deal with a director of a company that went into liquidation, Village Green Environmental Solutions, which saw him personally making payments of $34,000 to employees.

In a further case, the manager of a retail store was ordered by the Victorian Magistrates’ Court to personally pay a former employee a penalty of $15,000 because he was “centrally involved” in underpaying the employee over $25,000.

Yesterday SmartCompany reported on the massive increases in fines imposed by the courts as a result of prosecutions initiated by the FWO. Information available on the FWO’s website also indicates that the burden of those penalties is increasingly being felt by the individuals behind businesses.

Since May the FWO reports that in at least a dozen cases, directors or managers of corporate employers have been fined for being involved in breaches by their companies. It seems that where the prosecution of individuals was once the exception it is now most definitely the rule.

The lesson for employers is that they cannot hide behind corporate structures. The onus has been placed squarely on anyone who manages a business and you don’t necessarily have to be a director or owner of the company. As was observed in yesterday’s report, business, especially small business, would be grateful for extra education about their obligations, but one of the biggest hurdles remains the complexity of the system and the resultant inability of even the most competent industry groups or professional advisers to provide a definitive answer in every case.

The FWO has made the position clear: if you don’t make the effort to learn about your obligations to employees, then they will go after you. And the facts are there to show they mean it.

Peter Vitale is a lawyer and adviser, who has more than 17 years experience advising employers about workplace and industrial relations law.