Heavy fines for franchisee’s record keeping breaches

A former Franchisee operator and the company’s owner have been handed down large penalties for a number of record keeping breaches after a Fair Work Ombudsman investigation.

Background

In Fair Work Ombudsman v Aulion Pty Ltd (‘Aulion’) and Peter Dagher were ordered to pay pecuniary penalties of $80,190.00 and $16,038.00, respectively, after Judge Street of the Federal Circuit Court found that they had falsified employee records related to pay and failed to provide payslips on time.

The Fair Work Ombudsman brought the Application in the Federal Circuit Court alleging that Aulion and Mr Dagher had engaged in various breaches of the Fair Work Regulations 2009 that related to the accuracy and keeping of employee records.

The Ombudsman had previously used its powers under the Fair Work Act 2009 to audit Aulion when it issued notices to produce various documents relating to employees pay in 2016. Aulion provided the documents, however, the Ombudsman suspected that the documents it received were not accurate and continued to investigate. After reviewing bank, superannuation and accounting records, the Ombudsman brought action in the Federal Circuit Court against the Aulion and Mr Dagher.

In Court, Aulion admitted that it had misled the Ombudsman and provided false documents and records. Mr Dagher was involved in the contraventions. The Ombudsman Natalie James, said, “False records at this Caltex outlet were so bad we couldn’t properly audit the biz to determine underpayments. Pleased even higher penalties will apply in the future.

Penalties

Previously, the largest penalty that a court could impose for breaches related to employees wages and entitlements was $10,800. After the recently implemented Fair Work Amendment (Protecting Vulnerable Workers) Act 2017, the maximum is now $108,000. The Ombudsman, Natalie James, said that the penalties were “the highest penalty yet in court action solely for record keeping & payslip breaches.

The large penalties reflect the impact the amendments will have on Courts ability to penalise employers breaching civil remedy provisions of the Fair Work Act 2009 that relate to record keeping. The amendments mean that multiple and continuous breaches of record keeping provisions give Courts discretion to invoke larger penalties.

Lessons for employers (and employees)

The most important take-away from the case is that employers ensure that they maintain and manage their employee pay records with the utmost care. The Fair Work Ombudsman’s combination of powers in relation to production of documents and the higher penalties that Courts can now order against employers and individuals involved in contraventions means that the risk for employers who aren’t willing to comply with their obligations is significantly higher.

Employees should be encouraged that the Ombudsman and the Commonwealth Parliament seem more and more willing to ensure that their interests are being protected under the Act.

Judge Street is yet to publish reasons for the decision.

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