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 and/or 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. Section 557A provides for the imposition of harsher penalties for corporations and individuals who knowingly and repeatedly breach the FW Act.
As a general rule, parties to proceedings brought under the FW Act usually pay their own legal costs. This is unless 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 and 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 usually commenced in either the Magistrates’ Court, County Court or 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.
Where the applicant concurrently wishes to make a claim in a federal court (e.g. for a breach of the NES), the applicant may also bring a claim for the recovery of a contractual debt as an “associated claim” in the same court.
Under section 548 of the FW Act, employees can choose to take their own legal action to recover employment entitlements – up to a maximum amount of $20 000 – using the small claims process. The small claims process may be quickers, cheaper and more informal than regular court proceedings. The aim is to settle disputes quickly and fairly with minimum expense to the parties. Matters are usually resolved with only one hearing. The simple process means there is usually no need for the involvement of lawyers.
For more information about making a small claim, see the Fair Work Ombudsman’s “Small Claims Guide” at www.fairwork.gov.au/how-we-will-help/how-we-help-you/help-resolving-workplace-issues/taking-legal-action-in-the-small-claims-court.
The Fair Entitlements Guarantee Act 2012 (Cth) 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.
FEGS is administrated by the Australian Government Department of Employment, Skills, Small and Family 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 Appeals Tribunal (s 40).For more information about the scheme, see www.jobs.gov.au.