Outrageous Exploitation of a Young Person
A plumber in Victoria has been fined $121,500 for paying an apprentice at apprenticeship rates (without a fully signed training contract).
The plumber traded through a company and the fines were split between the company and the director involved in the contravention:
- $100,000 – company; and
- $21,500 – director.
Lucky for the plumber this took place in 2014 otherwise the fines would have been much higher.
No training contract / not an apprentice
The young worker was engaged in September 2014 as a second year apprentice. However, because no training contract was ever signed or registered, the worker could not legally be considered an apprentice. None of the work performed by the “apprentice” could be credited towards his apprenticeship.
Despite receiving advice form the Fair Work Ombudsman that the worker should be paid as a laborer, the business paid the worker at apprentice rates. At the time, the hourly rate for:
- a second year apprentice was $12.18 per hour; and
- a laborer was $37.08 per ordinary hour under the business’ enterprise agreement.
The worker also performed 201 hours of overtime during the three months he was employed, but was not paid for the majority of that work at the correct rate.
After the Fair Work Ombudsman became involved the business rectified the underpayments. Despite this, the plumber was still fined.
In handing down the decision, Justice Reithmuller described the employer’s conduct as an outrageous exploitation of a young person, which was worse than simply underpaying an employee, because the business had held out the lure of an apprenticeship to the worker which was a significant career and life goal for a young person.
Reminder to employers
- You must understand the applicable laws, Awards and Enterprise Agreements (or engage a lawyer who can interpret them for you);
- you must understand how to correctly classify a worker and apply the right rates;
- you must ensure your agreements are prepared correctly and signed;
- if you are directed by the Fair Work Ombudsman to do something – you should do it (or you risk being fined).
Introduction of “serious contravention” – fines 10 times higher than before
The incident occurred in 2014. Had it occurred more recently, the fines would have been much higher.
In 2017, the Fair Work Act was amended to introduce the concept of “serious contraventions”.
A serious contravention is where a person:
- knowingly contravenes the Fair Work Act; and
- the contravention is part of a systematic pattern of conduct relating to one or more persons.
This would have been a serious contravention because the Fair Work Ombudsman told the employer to rectify the underpayment but the plumber did not do so immediately.
Fines under the Fair Work Act
Additionally, there is now a reverse onus of proof in underpayment cases were an employer has not kept adequate records. This means that where an employer has failed to meet certain record keeping obligations, a worker does not have to prove they have been underpaid. Rather, the employer must prove there has been no underpayment (which may be difficult if there is no written evidence to support it).
You can read more about your record keeping obligations here.
It is more cost effective to spend money upfront to get your employment system right, than having to deal with the consequences and defend claims.
Employers should ensure they understand and comply with their payment and record keeping obligations to avoid costly fines or enforcement proceedings.