Fair Work Ombudsman secures record $126,000 penalty against Brisbane businessman for underpaying staff - SmartCompany

By Alan J. McDonald

The highest awarded penalty has been imposed on a Brisbane businessman by the Fair Work Ombudsman, who was pivotal in the underpayment of employees of a cleaning company. McDonald Murholme Principal lawyer discusses the reasoning behind the Fair Work Ombudsman’s decision.

See below article for further details.

Fair Work Ombudsman secures record $126,000 penalty against Brisbane businessman for underpaying staff – SmartCompany

A legal action initiated by the Fair Work Ombudsman has resulted in a penalty of $126,540 against a businessman “centrally involved” in a Brisbane cleaning company, the highest ever penalty secured by the FWO against an individual.

In a release, the FWO outlines the penalty against businessman Bijal Girish Sheth, who was involved with Queensland based cleaning company Brisclean Pty Ltd. The penalty was decided in the Federal Circuit Court as a result of action by the FWO.

The case considered whether Sheth was deliberately breaching sham-contracting laws by misclassifying four migrant employees as independent contractors, who were then underpaid. On top of the near-$130,000 penalty, he has been ordered to back-pay the workers $59,878.

The business paid the workers as little as $17 dollars an hour and did not pay them at all for some work. The court ordered that if Sheth does not comply with the back-pay order, that part of the imposed penalty will be paid to the workers instead, according to the Fair Work Ombudsman’s release on the case.

Another worker was also misclassified, but due to a lack of records, the amount they were underpaid could not be determined. The affected workers are two Indian visa holders and another three immigrants who are now permanent residents.

As the company was placed into administration last year, the FWO could not pursue penalties against the company. Instead it used the Fair Work Act’s accessorial liability provisions to seek a penalty against Sheth.

Principal lawyer at McDonald Murholme told SmartCompany that “section 550 of the Fair Work Act deems that a person ‘involved in’ a breach of the Fair Work Act is taken to have personally breached the Fair Work Act”.

“Accordingly, that person is required to pay compensation and is liable for payment of a penalty.”

This is not the first time Brisclean was warned by the Ombudsman, with the FWO cautioning Sheth about sham-contracting previously. Fifteen other allegations of underpayment were made against the company, according to Fair Work.

Jewell believes the history of complaints would have contributed to the severity of the penalty in a case like this.

“The penalty is so high because of the history of complaints and the seriousness of the conduct,” Jewell says.

“Courts are generally relatively lenient towards accidental breaches or first offences, however deliberate breaches and a continued disregard for the law will result in significant penalties.”

A warning to “rogue operators”

Fair Work Ombudsman Natalie James said in the release that the scale of the penalty should serve as a warning to rogue operators across the nation.

“Even if you liquidate your company, it’s no guarantee of avoiding the consequences of non-compliance with the Fair Work Act,” James said.

“Any rogue business operator who thinks they can short-change workers and get away with it by shutting their company down should think again. We will seek to hold you to account at every available opportunity and you should be aware that we treat exploitation of vulnerable, migrant workers particularly seriously.”

Jewell says it is “common practice” for directors to be named personally, both in cases where the “financial viability of the business in is doubt or where an applicant seeks an additional penalty”.

“This prevents the directors from using a corporation to avoid liability,” he says.

The FWO said in a statement it believes Sheth to be operating the business under a new entity and will be referring the case to the Australian Securities and Investments Commission.

According to ASIC’s published insolvency notices, four separate applications for winding up orders have been submitted against Brisclean.

James has advised the cleaning industry will “continue to be a priority” for the Fair Work Ombudsman, stating, “Business models that involve exploitation of vulnerable workers are not acceptable and will not be tolerated”.

Jewell believes the nature of the industry attracts workers who do not have comprehensive knowledge of their rights.

“It would appear that the cleaning industry attracts workers without knowledge of their employment rights, such as migrant workers or students,” he says.

Jewell advises businesses wanting to ensure they are paying workers correctly to consult a lawyer or the FWO for guidance.

SmartCompany attempted to contact Brisclean, but was unable to reach the company, and was also unable to contact Sheth.

Reference: Fair Work Ombudsman secures record $126,000 penalty against Brisbane businessman for underpaying staff, SmartCompany, 16^th November 2016.