One Minute Summary

• A small business owner, as the sole Director, was made personally liable after his business went into liquidation during Federal Court proceedings.
• The owner faced multiple breaches including not providing payslips, keeping records, providing information statements and paying his employee correctly.
• The owner also faced sexual harassment charges which he denied until well into proceedings despite obvious evidence.
• In total the Director will pay over $90,000 penalties and compensation.

In an unusual decision from the Federal Circuit and Family Court of Australia (‘the Court’) a Director of a small business (a café in Canberra) was held personally liable for an award of approximately $90,000 after the business was placed into liquidation before the Court could hand down a decision.

The business had faced the following breaches before it went into liquidation:

1. Sexual harassment
2. Failure to provide a Fair Work Information Statement and Casual Information Statement.
3. Failure to ensure that copies of the Restaurant Award and National Employment Standards were readily available to employees.
4. Failure to provide payslips and within one day of payment
5. Providing misleading and false payslips to the Fair Work Ombudsman
6. Failure to pay casual loading
7. Failure to pay overtime correctly
8. Underpayments in relation to the performance of work
9. Failure to make superannuation payments
10. Failure to make and keep employee records

The Court dealt with the above matters in two parts.

Item (a) sexual harassment was prosecuted under the new Fair Work provisions s545(2)(b) dealing with sexual harassment.

Items (b) to (j) resulted in penalties of $30,610.  This amount was approximately 10% of the total penalties that could have been awarded which totalled $306,000. While it is not entirely clear from the decision it appears as though the sole Director/owner became quite cooperative in acknowledging the breaches part way into the Court proceedings.

The Court stated ‘the objective seriousness in this case is the comprehensive, if not complete, disregard for the obligations under the Act which manifested in all of these contraventions.‘ 

All business owners need to be aware how important some of the items are in the Court’s eyes. The Court placed particular emphasis on employees receiving the information statements, that a copy of the relevant Award and National Employment Standards were available in paper format or the employees had easy electronic access and the provision of payslips to employees within one day of being paid. While most employers use payroll systems that provide payslips and keep records not all employers have systems in place to ensure new employees and casual employees receive the information statements.

The misleading pay records which had been provided by the Director to the Fair Work Ombudsman was also treated very seriously.

Sexual Harassment

In relation to the sexual harassment charges the background information is as follows:

• The employee was 23 years of age and had recently arrived from Columbia speaking limited english.
• She was employed on a casual basis as a waitress for about 12 weeks until the following occurred.
• On one afternoon the café owner suddenly hugged her pining her against the wash basin. When she managed to break free from the hug and turn around, he kissed her on the lips.
• The employee immediately left the workplace and never returned.
• The owner sent multiple txt messages of apologies the next day and several days later.  The messages stated he would never do this again and asked the employee not to tell the owner’s wife.

The owner denied what had occurred only acknowledging guilt a fair way into Court proceedings.  This is quite surprising given the obvious text messages he had sent in the days after the incident.

Section s545(2)(b) is fairly new and untested having been inserted into the Fair Work Act  Respect at Work Sexual Harassment amendments not that long ago. It supports the various sex discrimination options available to employees under other legislation.

In confirming compensation and penalty payments of approximately $60,000 in relation the sexual harassment the Court noted:

• The applicant was a vulnerable person – being relatively young, female, a migrant, of limited financial resources and limited social supports.
• The owner was in a position of authority.
• The contravention was a single incident. There was no evidence of any prior inappropriate behaviour, targeting or permissive culture.
• The owner had expressed remorse several times after the incident – but finding the motivation behind the messages were not acceptance of responsibility but were motivated by incident to become disclosed – including to the owner’s wife.
• The owner had admitted the incidents despite initially denying them.

While the amounts for ‘non-economic loss’ were negotiated on the sidelines of the proceedings the Court endorsed the amounts stating “Having had regard to all of the factors, I am satisfied that the pecuniary penalties in the amounts jointly sought by the parties are within the permissible range and may thereby be deemed as appropriate.”

In total the owner was required to pay penalties and compensation for non-economic loss for all the breaches of approximately $90,000.

Commentary

The discussion around compensation for non-economic loss looked at both the magnitude of the incident and the impact on the Applicant/employee. Interestingly the Court accepted both the following arguments:

• The Counsel for the Applicant stated the conduct of the owner caused significant distress and humiliation including that she had lost her job, had trouble sleeping, cried and felt unsafe at home following the incident.
• The Counsel for the owner acknowledged the Applicant had sustained an injury but had only accessed her GP on one occasion and had not received any Psychological counselling. She had started a new job 22 days after the incident took place. The purpose of this submission was to downplay the impact of the incident on the Applicant.

Given the complexity of the Fair Work system smaller employers are more likely to miss some of the breaches noted above in (b) to (j). In most cases this will be due to lack of knowledge or understanding of their obligations. It is recommended that employers audit their requirements and put in place systems to ensure key actions occur.

The penalties imposed were about 10% of the maximum that could have been imposed. I would venture that a larger employer would have received much higher penalties in the same circumstances.

In respect to pay-slips and pay record obligations Hunter Employee Relations has developed an Employer Guide for Small Business as a useful guide. Please request a copy.

The sexual harassment facts as provided above would often result in a much higher financial settlement demand from an employee’s legal representative. It could be stated the compensation outcome would be on the low side.

Employers are vulnerable to a rouge employee initiating one-off sexual harassment behaviour such as occurred in this case. To minimise the risk, employers need to make it very clear through employee briefings what is or is not acceptable workplace behaviour.

Please contact Hunter Employee Relations for a copy of the Employers Guide to Workplace Bullying, Harassment & Discrimination to discuss briefing sessions for your employees.

Kind Regards

Michael Schmidt

M 0438 129 728

[email protected]

www.hunteremployeerelations.com.au

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