An individual, not just the employer company, can be liable for compensation or penalties for Award underpayments, if that individual is “involved in” the underpayment.
To be “involved in” an underpayment, the individual must have:
The definition of “involved in” is very broad and will capture circumstances where an individual has actual knowledge of the Award which specifies minimum rates and that rates actually being paid were less than the rates specified. This knowledge can be inferred, particularly where an individual has worked in the relevant industry for a significant period of time.
Even individuals who are no longer involved in the employer’s business, but who were involved at the time of the contravention, can be held liable for Award underpayments.
In February 2015, the Federal Circuit Court of Australia ordered that the current and several former directors of the employer company were liable for compensation to an employee who was paid under the Award.
In April 2015, the Federal Court of Australia ordered that a director of the employer company pay a penalty in the sum of $8,000 for being involved in Award contraventions, specifically failing to pay the Award rate for two employees.
In June 2015 the Federal Circuit Court of Australia ordered the sole director of the employer company to pay a penalty of $28,900 for contravening the relevant Award in respect of 15 employees that were not paid the minimum wage.
The number of decisions that impose penalties on directors show that the courts are more than willing to sheet liability home to individuals in circumstances of Award underpayments.
Although in most cases, the individuals liable are directors of the company, the liability can extend to individuals who are not directors. For instance, in the right circumstances, managers and supervisors could be found to be “involved” in an underpayment and liable to pay penalties.
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