Fines for shoddy bookkeeping are too low to deter businesses from underpaying workers and is helping them avoid prosecution.
Fair Work Ombudsman Natalie James raised the problem when she addressed the Australian Industry Group on Monday, noting that her staff sometimes had to take extreme steps such as camping outside workplaces to monitor when staff were working because record-keeping was so poor.
Fair Work Ombudsman Natalie James. Photo: Penny Stephens
This was crucial, she said, because inadequate records hindered her office’s capacity to “assess and rectify underpayment of wages”.
“Poor or inadequate record keeping is one of our most fundamental challenges,” Ms James said.
“The comparatively low penalties that currently apply for record-keeping contraventions arguably create a perverse incentive. An incentive to not keep accurate records to conceal underpayment of wages.”
An increasing proportion of the Fair Work Ombudsman’s most serious cases have involved record-keeping breaches.
“If we truly want to stop this conduct, these operators need to believe that they will be caught,” Ms James said.
“And that, when they are, the consequences will significantly outweigh the benefits of breaching the law.
“This means that penalties need to be set at an appropriate level.”
Fair Work inspectors can issue an on-the-spot fine of up to $540 for an individual and $2700 for a corporation.
Ms James said the Fair Work Ombudsman also needed to have the power to fully investigate cases of non-compliance so that rogue employers “can’t simply avoid tough penalties by refusing to engage”.
The Federal Circuit Court has described accurate record keeping as the bedrock of compliance. But the Fair Work Ombudsman has seen cases where records have not been kept at all or falsified.
“Both scenarios are sometimes used as a tactic to avoid underpayments being detected or quantified,” Ms James said.
“Unless workers have meticulously kept their own records of their hours of work, it becomes very difficult to assess whether underpayments have arisen and to be able to prove the quantum to the satisfaction of a court.”
In the 2015-16 financial year, the Fair Work Ombudsman took legal action in 26 cases involving alleged record-keeping contraventions.
In 62 per cent (16) of the cases the record-keeping contraventions made it difficult or impossible for the Fair Work Ombudsman to accurately calculate underpayments allegedly owed to 265 workers.
There have been 17 legal cases so far in this 2016-17 financial year involving alleged record-keeping contraventions. Of these, 88 per cent (15) involved record-keeping breaches that made it difficult or impossible to calculate underpayments owed to 463 workers affected.
Ms James told the Australian Industry Group that of 4539 audits by her office last year, 933 (or 21 per cent) identified record-keeping contraventions. Most were resolved without formal enforcement action.
Last month, Ms James told a parliamentary inquiry that a persistent minority of employers flouted the law and risked existing fines because they were not severe enough to act as a deterrent.
Despite having won successful prosecutions in court, Ms James admitted her office had limited capacity “to disrupt the most deliberate and systemic conduct, or to reverse the apparent culture of non-compliance in high risk industries and sectors”.