$447,300 Penalty for Cleaning Company Treating Migrant Workers As “Slaves”

Operators of a Sydney cleaning company face near-record penalties of $447,300 for treating vulnerable migrant workers as “slaves”.

The Federal Court has found that Grouped Property Services deliberately exploited 51 non-English speaking workers, who were predominately foreign nationals on temporary visas, by underpaying them  amounts ranging from $58 to $23,474.

According to a Fair Work Ombudsman statement, the case involved dubious ‘labour hire’ arrangements, corporate structures and sham contracting arrangements that were used by a second time offender in a calculated attempt to avoid responsibility for paying vulnerable workers’ wage entitlements.

Summary

Grouped Property Services Pty Ltd, a Sydney-based cleaning company, has been penalised $370,000 and ordered to back pay $223,244 to 49 employees it exploited between 2011 and 2013.

The former owner-operator of the company was described by the Federal Court as being “intimately involved” in the exploitation and the Court imposed on him a further penalty of $74,300. The company’s owner and sole director, a family member of the owner-operator, was also penalised $3000 for his involvement in contravening the Fair Work Act.

In 2011, the Fair Work Ombudsman secured $4400 in Court-issued fines against the owner for underpaying three employees – however the company was placed into liquidation preventing the Fair Work Ombudsman from securing penalties against it.

In 2014, the Fair Work Ombudsman secured a freezing order to prevent Grouped Property Services from being stripped of its assets or placed into liquidation, which would have circumvented any Court order.

The Federal Court has found that Grouped Property Services deliberately exploited 51 non-English speaking workers, who were predominately foreign nationals on temporary visas, and were unlikely to have been familiar with Australian labour laws. They were individually underpaid amounts ranging from $58 to $23,474.

Background

Grouped Property Services claimed that the 51 workers were employed by a purported labour-hire company National Contractors Pty Ltd. National Contractors was registered at the Grouped Property Services business address.

The Fair Work Ombudsman proved in Court that Grouped Property Services was the true employer of the workers and that National Contractors was merely a shell company set up by Grouped Property Services to avoid paying employees the minimum Award wages and entitlements that applied to their positions.

Instead, Grouped Property Services required workers to obtain ABNs and submit invoices for payment and then paid the workers arbitrarily determined low flat rates that undercut Award minimums – or in some instances paid them nothing at all.

Three other purported labour hire companies that had formerly been registered at the Grouped Property Services business address had previously gone into liquidation.

Aggravating Factors

Justice Katzmann found that the conduct of Grouped Property Services caused the employees “considerable hardship”, with some giving evidence that underpayments caused them mental, emotional and financial stress and anxiety. Many workers also had to borrow to meet household expenses and at least one went without food.

One Colombian student was threatened by the owner-director with deportation and another international student was forcibly removed from Grouped Property Services’ office, for asking for outstanding wages.

In addition to the penalties, back-pay order and injunction, the Fair Work Ombudsman also secured Court Orders requiring Grouped Property Services to commission a professional external audit of its payment practices and rectify any underpayments discovered. The company must also commission training on workplace relations laws for its managers.

What can your business learn from this?

This is a serious case which should serve as a warning to organisations who might seek to use complicated corporate structures to avoid their workplace obligations to their workers, including their obligation to pay minimum award rates and statutory entitlements.

More generally, this case shows that it is increasingly likely that individuals such as company directors or operational staff will be held responsible for breaches of fair work and other workplace laws. In this case, the vulnerability of migrant workers was an aggravating factor leading to higher penalties and findings of personal, accessorial liability for the individuals concerned.

Also, it is possible for the regulator to obtain freezing orders to prevent unscrupulous operators from dodging liability for worker entitlements.

Source: Fair Work Ombudsman

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