The recent Federal Circuit and Family Court decision of Baldacchino v Bloombird Education Pty Ltd (No 2) [2023] FedCFamC2G 965 (27 October 2023) highlights the risk of cumulative civil penalties for employers who fail to pay employee termination entitlements in accordance with workplace laws.
The Court ordered that Bloombird Education pay civil penalties of $136,000 and its director to personally pay civil penalties of $27,200, for failing to pay a former employee her annual leave entitlements on termination of employment. The Court ordered the penalties to be paid directly to the employee, in addition to the $42,374 in compensation for the unpaid annual leave entitlement.
The Court held that by failing to pay the annual leave entitlements, the employer and its director contravened four distinct provisions of the Fair Work Act 2009 (Cth) (FW Act) regarding the payment of annual leave, annual leave loading and superannuation and its employer record keeping obligations.
The Court held that where an employer fails to pay out employee entitlements because they did not have the financial means does not make the failure to pay the entitlements any less deliberate.
With the Federal government's recent Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 proposing a fivefold increase in civil penalties for underpayment offences under the FW Act and introducing a national criminal wage theft offence, this decision is a timely reminder to employers, directors and managers of the importance of ensuring compliance with workplace laws.
To reduce the risk of an underpayment claim, employers should:
- ensure employees are paid at least in accordance with the applicable lawful minimums, including by identifying the correct industrial instrument and classification for each employee, where applicable;
- ensure compliance with employee record keeping obligations under the FW Act, including by keeping accurate time and wage records;
- ensure employee entitlements on termination are paid in accordance with applicable laws (noting that certain industrial instruments and legislation may require payment of some entitlements within specific timeframes);
- obtain legal advice as soon as possible if they identify an underpayment or potential underpayment; and
- be aware that relevant managers and directors who are 'involved in' an underpayment can be held personally liable and made to personally pay compensation and/or civil penalties.
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