Record $126,000 penalty against Brisbane businessman for underpaying employees

A legal action initiated by the Fair Work Ombudsman has resulted in a penalty of $126,540 against a businessman “centrally involved” in a Brisbane cleaning company, the highest ever penalty secured by the FWO against an individual.

In a press release, the FWO outlines the penalty against businessman Bijal Girish Sheth, who was involved with Queensland based cleaning company Brisclean Pty Ltd. The penalty was decided by the Federal Circuit Court during legal proceedings commenced by the FWO.

The case looked at whether Sheth was deliberately breaching sham-contracting laws by misclassifying four migrant employees as independent contractors, who were then underpaid. On top of the near-$130,000 penalty, he has been ordered to back-pay the workers $59,878.

The business paid the workers as little as $17 dollars an hour and did not pay them at all for some work. The court ordered that if Sheth does not comply with the back-pay order, that part of the imposed penalty will be paid to the workers instead, according to the Fair Work Ombudsman’s release on the case.

Another worker was also misclassified, but due to a lack of records, the amount they were underpaid could not be determined. The affected workers are two Indian visa holders and another three immigrants who are now permanent residents.

The company was placed into administration last year, and so the FWO could not pursue penalties against the company. Instead it used the Fair Work Act’s accessorial liability provisions to seek a penalty against Sheth.

Section 550 of the Fair Work Act deems that a person ‘involved in’ a breach of the Fair Work Act is taken to have personally breached the Fair Work Act. This means that the person involved is required to pay compensation and is liable for payment of a penalty.

Brisclean had been warned by the Ombudsman on numerous occasions, and it is likely that the history of complaints contributed to the severity of the penalty.

Courts can be relatively lenient towards accidental breaches or first offences, however deliberate breaches and a continued disregard for the law will result in significant penalties.

A warning to “rogue operators”

Fair Work Ombudsman Natalie James said in the release that the scale of the penalty should serve as a warning to rogue operators across the nation.

“Even if you liquidate your company, it’s no guarantee of avoiding the consequences of non-compliance with the Fair Work Act,” James said.

“Any rogue business operator who thinks they can short-change workers and get away with it by shutting their company down should think again. We will seek to hold you to account at every available opportunity and you should be aware that we treat exploitation of vulnerable, migrant workers particularly seriously.”

Directors can be named personally in legal proceedings, both in cases where the financial viability of the business in is doubt or where an applicant seeks an additional penalty.  This prevents the directors from relying on using a company as a liability shield.

The FWO said in a statement it believes Sheth to be operating the business under a new entity and will be referring the case to the Australian Securities and Investments Commission.  According to ASIC’s published insolvency notices, four separate applications for winding up orders have been submitted against Brisclean.

James has advised the cleaning industry will “continue to be a priority” for the Fair Work Ombudsman, stating, “Business models that involve exploitation of vulnerable workers are not acceptable and will not be tolerated”.

Source:  SmartCompany

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