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Hair and beauty salon backpays workers $25,000 but avoid penalties after signing deal with workplace watchdog - Smart Company

By Alan J. McDonald

Smart Company

A Sydney-based beauty and hair salon has avoided paying penalties by entering into an enforceable undertaking (EU) with Australia’s workplace watchdog after admitting to underpaying seven workers more than $25,000 and failing to issue them payslips.

OKS Hair and Beauty Salon in Lidcombe drew the attention of the Fair Work Ombudsman (FWO) after one of its workers, a Korean national, became aware that her rate of pay was not in line with minimum pay rates in Australia.

After investigating, the FWO found that seven workers at the salon, of which at least two were Korean nationals, were being underpaid minimum rates, penalty rates, and some were being paid cash-in-hand.

In total, the seven workers were underpaid a combined amount of $25,045 between March 2016 and May 2017.

However, due to the full cooperation between the company’s director and the FWO, the watchdog did not pursue legal action. Instead, the business has entered into an enforceable undertaking with the Ombudsman, which compels the employer to backpay the workers along with a set of other stringent requirements.

The company is required to employ an auditor to audit its employee’s pay three times over the next two years, and has agreed to complete comprehensive training for all staff involved in human resources or payroll parts of the business.

Furthermore, the director and his mother, who helped run the business, must complete additional training via the FWO, and provide a $5000 donation to the Marrickville Legal Centre.

“[Enforceable undertakings] allow the Fair Work Ombudsman to achieve strong outcomes against companies that breach workplace laws without the need for civil court proceedings, which are often lengthy and can significantly extend the time it takes for workers to receive their entitlements,” acting Fair Work Ombudsman Kristen Hannah said in a statement.

“This EU puts in place robust measures to ensure [the director and the company] take real steps to improve their workplace practices and ensure sustained compliance with workplace laws going forward. This will make a real difference to workers.”

Enforceable undertakings benefit businesses

Speaking to SmartCompany, Trent Hancock, principal lawyer at McDonald Murholme, says enforceable undertakings are somewhat of a rarity from the FWO these days, noting there have only been four posted on the watchdog’s website between 2017–18.

Enforceable undertakings do not pass through court and are a set of agreements between the FWO and the company in question. If the company is found to breach the agreements, Hancock says the FWO can make an application through the courts for orders or penalties to be then made against the business.

“Enforceable undertakings happen in circumstances where there’s full cooperation by the employer, and it’s in the interest of all parties to begin one,” he says.

Outside of avoiding significant penalties and drawn-out, expensive cases for businesses in court, Hancock says there’s a number of other benefits for businesses who go down the full cooperation route.

“There’s a level of guidance when you enter into an enforceable undertaking, and employers often agree to a level of training from the FWO, and obtain a lot of guidance around paying employees properly,” he says.

Hancock stresses that enforceable undertakings are highly beneficial to businesses that have found to be contravening the Fair Work Act, and he urges business owners to always cooperate with the FWO where possible.

“It’s always in your interest to cooperate with the FWO, and it’s unfortunate they’re seen as the enemy in the eyes of a lot of employers, which is a foolish way to see them,” he says.

“They’re there to ensure compliance, and any employer should cooperate with the FWO as no employer should be wanting to underpay their employees.”

SmartCompany contacted OKS Hair and Beauty Salon but did not receive a response prior to publication.

Reference: ‘Hair and beauty salon backpays workers $25,000 but avoid penalties after signing deal with workplace watchdog‘ Smart Company, Monday 9th July 2018.