The new reality of workplace compliance enforcement is that large, sophisticated employers are regularly being caught out for inadvertent breaches, says former Fair Work Ombudsman Natalie James.
James told HR Daily that during her time as FWO, it was mainly smaller companies whose names nobody would recognise that were involved in workplace breaches, characterised by wilful non- compliance or exploitation.
But in the past five-to-six years that has changed dramatically and it’s big-name employers attracting the regulator’s attention.
In these cases, she notes, it’s not that employers are wilfully or recklessly failing to comply with the Fair Work Act and other laws, “but it certainly isn’t deliberate, conscious compliance either”.
“Compliance at its most basic in Australian workplace relations law is paying employees correctly,” she says, while conceding the system is “very complex”.
James, now a partner at Deloitte, told the recent CXC Emerging Workforce Summit that large employers’ non-compliance is due to what she calls ‘systems-embedded compliance failures’ (SECF).
She says there are two key reasons for SECF, and “the first is misinterpretation of the law”.
Incorrectly classifying employees; a system that isn’t equipped with the right triggers for allowances, overtime and penalties; and a lack or complete absence of time-keeping records set employers up for compliance issues, she says.
The “big one”, however, is annualised salaries.
“People are often being put on quite good overall annualised salaries and then the assumption seems to be in business [that] if you’re on an annualised salary, you are not on the award. You are not covered by [an] agreement. Who decided that?” she asks.
Employees with an annualised salary who also fall under an award or agreement and don’t have a
set-off clause in their contract “should be getting at least what they should have got under the agreement or award for every hour they’ve worked” in each salary period, says James – an important fact to keep in mind for salaried employees who regularly work overtime.
She encourages employers to look closely at agreements and awards and check the scope provisions and coverage clause, because if employees fall within those descriptions, they are entitled to the outlined hourly rates, penalty rates and overtime.
“The recording of hours is paramount,” she stresses, noting that the annual true-up process required by some awards with annualised salary clauses cannot be performed without it.
No room for complacency with outsourcing
James also warns employers against becoming complacent about their outsourcing arrangements.
Pointing out that risks in the supply chain were already “a big focus” when she was Ombudsman, she says triangular relationships add complexity to workplace compliance.
Employers that use labour hire arrangements cannot outsource their obligations and are, for example, “responsible for counting the hours of the worker”, she says.
Tracking hours has become even more critical because of the reverse onus of proof in claims, and “reverse engineering what has happened and making good is incredibly complicated”, James warns.
“If hours of work haven’t been kept, you have to look to other sources of evidence. You look to other records and other data to try and work out what hours are actually worked. Make no mistake, you are in a remediation space. The risk has become shared.”