Underpayment

Minimum payments under various Awards, Enterprise Agreements and employment contracts has been a complex issue in Australia for a long time. This is because negotiations regarding wages have varied greatly between workplaces, the type of work performed, and the years of experience and/or level of the employee.

Underpayments

Mistakes have consistently been made in the calculation of wages. This has resulted in underpayment of wages, often spanning over many years. It is unlawful to underpay an employee and significant penalties may apply.

To identify an underpayment is time-consuming and depends on many factors including:

  • proper classification of the work being undertaken by the employee;
  • the age of the employee;
  • the level at which the employee is performing the work;
  • the days on which the work is performed by the employee;
  • the number of hours an employee is working per day;
  • whether or not allowances (i.e. clothing or meals) apply. These are usually unique to a workplace/industry; and
  • whether an employee has the benefit of an old award because they did not sign up to, or become bound by, a more recent industrial agreement such as an Enterprise Agreement.

When large numbers of employees are involved against big employers (e.g. Coles or Woolworths), the Fair Work Ombudsman has been known to take a keen interest in enforcing the agreement. Where a small employer is concerned, the same rules apply but with less fanfare.

After an underpayment is identified, it can take 6 months for the Fair Work Ombudsman to make a ruling. Often it is a ruling which the employee disagrees with. Whether or not they agree, it is usually left up to the employee to engage their own lawyer to then bring a legal proceeding against the employer for the amount of underpayment.

Underpaid employees should consider whether or not to fast track the process by going straight to a lawyer even though this can be a more expensive process, at least in the beginning. McDonald Murholme offers assistance in the calculation and the legal action to recover underpayments.

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Frequently asked underpayment law questions
How do I know if I am being underpaid?

To determine if you are being underpaid, you need to find out the correct rate at which you should be paid. This can be affected by a range of factors including, whether you are full-time or part-time, whether you are casual or permanent, whether you are a trainee or apprentice, your age and your qualifications. You can contact the Fair Work Ombudsman to find out if you are entitled to be paid above the National Employment Standards pursuant to a modern award or enterprise agreement.

Can I file an underpayment claim in relation to a former job?

You can bring a claim for historical underpayments, however, this is subject to a six-year time limit under subsection 545(5) of the Fair Work Act 2009 (Cth). For example, an employee who files an underpayment claim on 1 January 2020 can seek an order to recover any underpayments that occurred after 1 January 2014.

I am an independent contractor. Am I eligible to file underpayments claims?

You are more likely to be deemed an independent contractor if you invoice the entity for whom you perform work. This is a matter of negotiation between the independent contractor and the principal and as such, independent contractors are not afforded the same legal protection for pay rates and minimum terms and conditions of employment as employees.

Independent contractors are not entitled to a minimum rate of pay or conditions such as annual leave, personal leave, parental leave, long service leave and redundancy entitlements. Further, independent contractors cannot file a claim with the Fair Work Ombudsman to recover underpayments for work performed and will need to commence legal proceedings in either an eligible court or the Civil and Administrative Tribunal of their state instead.

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