Employees have several options when entitlements or national standards are not being recognised by their employers. If initial discussion with the employer fails, Fair Work inspectors may prosecute, or the employee can sue as a civil claim for breach of award or contract. There is an insolvent employer compensation scheme to cover wages lost through employer insolvency.
An employee who has a dispute with an employer concerning an entitlement under an enterprise agreement, a common law contract of employment or the relevant award should first raise the matter with the employer, or ask their union to do so. If the matter is not resolved, the following steps could be considered.
The Fair Work Act 2009 (Cth) (“FW Act”) empowers inspectors to investigate breaches of awards and enterprise agreements. Inspectors are appointed by the Fair Work Ombudsman under section 700 of the FW Act. If, on investigation, the inspector considers that there has been a breach of an enterprise agreement or award, they will usually attempt to get the employer to rectify it. If the employer fails to rectify the breach, the inspector may then prosecute the employer.
The legislation protects employees from any discriminatory action by an employer as a result of an employee making a report about breaches of employment conditions. Underpayment of wages, or non-payment, is considered to be a breach.
Breach of an award or an enterprise agreement
A union or individual employee covered by the National Employment Standards (NES) (see Employment contracts, awards and agreements), a federal award, enterprise agreement or collective agreement may bring proceedings for a penalty, the recovery of money due and payable under the award or agreement (ss 44, 45, 50, 539, 540 FW Act). The proceedings may be brought (most commonly) in the Federal Circuit Court or in the Federal Court. Proceedings for an injunction to stop or remedy the effects of a breach may only be brought in the Federal Circuit Court or the Federal Court (s 545).
The FW Act imposes maximum penalties, with higher penalties for corporations than for individuals.
The general rule about proceedings brought under the FW Act is that the parties bear their own legal costs. Except, where it can be shown that the proceedings were brought vexatiously, or without reasonable cause. Or, that the party’s unreasonable act or omission caused the other party to incur costs. Or, that the other party unreasonably refused to participate in a matter before the Fair Work Commission (FWC) that was related to the matter in which costs were sought (s 570).
Proceedings may be brought up to six years after the date payment was due.
An employee whose employment is governed by a common law contract of employment, who has been underpaid, can take action to recover wages as a contractual debt. The employee sues on the basis of the terms and conditions of the contract of employment and in this way can recover over-award payments or payments in excess of the award entitlement. The employee can also proceed in this manner to recover the amount provided for in an award where a term of the contract of employment was that the employee would receive the amount payable under an award.
Proceedings for the recovery of a contractual debt are commenced in either a Magistrates’ Court, the County Court or the Supreme Court, depending on the amount in dispute (see An introduction to the courts). The time limit is six years. If no wage rate is fixed or agreed, the employee can sue for a reasonable price for the services rendered once the contract has been terminated.
The Fair Entitlements Guarantee Act 2012 (Cth) (which replaced the General Employee Entitlements and Redundancy Scheme (GEERS)) provides a Fair Entitlements Guarantee Scheme (FEGS) to compensate employees who have lost wages and/or other entitlements due to an employer’s insolvency or bankruptcy.
The scheme is administrated by the Australian Government Department of Jobs and Small Business and applies to the employees of an employer who became bankrupt or entered liquidation on or after 5 December 2012. Decisions made under the scheme can be reviewed internally (s 38) and externally by the Administrative Affairs Tribunal (s 40).
Where an employer became bankrupt or entered liquidation before 5 December 2012, employees can claim for lost wages and entitlements under FEGS.
For more information about the scheme, visit www.jobs.gov.au.