Deliberately underpaying staff - is it worth the risk?

A report released last year, Wage Theft in Australia, found that underpayment of wages is widespread amongst international students, backpackers and other temporary migrants in Australia with almost a third (30%) earning less than half the minimum wage for casual workers.

Natalie James, the Fair Work Ombudsman (“FWO”), has shown dogged determination in prosecuting employers who engage in this type of ‘wage theft’. Recently, in the first case of its kind, a Cairns employer was sentenced to 12 months’ imprisonment for contempt of court when he attempted to avoid paying fines and wages as ordered (Fair Work Ombudsman v Leigh Alan Jorgensen BRG1032/2017).

The employer, Mr Jorgensen, had run a tourist business in Cairns through his company Trek North Tours, and had underpaid, or failed to pay at all, five backpackers on working holidays. When the FWO investigated and determined that he must pay the workers approximately $30,000 in back pay and provide wage records, Jorgensen ignored the notices. He further compounded the situation by telling an inspector, “the compliance notices are rubbish. I have no intention of paying the money.”

The Court ordered Jorgensen to not only pay the back pay but also a fine of $12,000 for failure to comply. His company was also fined $55,000 for non-compliance. A court order was also imposed, freezing the company and Jorgensen’s personal assets until the amounts were paid.

Jorgensen paid the $12,000 personal fine but nothing else. Instead, in defiance of the Court orders, he transferred the company’s money (just over $41,000) into his family trust and sought to deregister the company so that the debt to the Commonwealth could not be paid.

The FWO not only initiated contempt of court proceedings but they also notified ASIC about Jorgensen’s attempt to deregister his company. Jorgensen had told ASIC in his application to deregister Trek North Tours that the company had no outstanding liabilities, conveniently overlooking the $85,000 debt in the FWO proceedings. ASIC are now prosecuting Jorgensen for a breach of the Corporations Act, namely providing false and misleading statements to ASIC.

Jorgensen is currently appealing his contempt of court conviction but spent a night in gaol before bail could be arranged. If convicted for breaching the Corporations Act, Jorgensen could face further significant fines or imprisonment.

Along with the plight of international workers, Ms James has highlighted the hospitality industry as another key area of focus for the Agency. In a recent radio interview, she raised alarming statistics that despite hospitality workers only making up 7.2% of the workforce, 39% of anonymous complaints and 17% of dispute forms come from workers in the sector.

Many of these exploited hospitality workers are in a similar position to the international students and backpackers. Generally, they are young, eager to gain work and reluctant to ask questions or push back in case they are seen as ‘being difficult’. In many instances, they also simply don’t understand what they are entitled to or how our employment laws work.

Employers who genuinely don’t know what they should be paying staff should contact the Fair Work Ombudsman or head to their website which has a number of resources designed to help.

For employers who are simply trying to make a quick buck or save some coin by systematically underpaying staff, it’s not worth the risk. Ms James has shown time and time again the lengths she will go to. As she declared following Mr Jorgensen’s conviction, the Agency is “prepared to use every tool at its disposal to ensure justice is served.”

This article was written by Senior Associate, Elizabeth Olsson

Practice Area: Employment

Head Office

5th Floor, 80 King William Street Adelaide, South Australia 5000
t: Australia (08) 8414 3400  International +61 8 8414 3400
t: Australia (08) 8414 3400
t: International +61 8 8414 3400
f: Australia (08) 8414 3444  International +61 8 8414 3444
f: Australia (08) 8414 3444
f: International +61 8 8414 3444

Connect With Us

ShareThis