What you need to know to prevent the collapse of your own business empire
We have all heard the case of George Calombaris from MasterChef, and the difficulties he has faced recently as a result of underpaying current and former employees of his restaurants. As a result of failing to have in place proper employment practices, he has now had to pay: (1) over $7.8m to former and current employees; (2) $200,000 in penalties; and (3) the cost of annual auditors to check and ensure that he is now paying employees correctly. In addition, he has had to make a public apology, which was obviously very embarrassing to him, and detrimental to his public image and that of his business.
Calombaris’ downfall occurred because he was paying his employees annualised salaries, however, he failed to reconcile them to ensure that the employees were not working more hours that what they should be paid for under the Modern Award. He also paid employees at the incorrect classifications under the applicable Modern Award.
So here are 5 tips to help employers avoid being in the same situation as George Calombaris.
1. Review your employment contracts
Your employment contracts should be properly drafted, preferably by an employment lawyer. If you do have an employment contract in place, get them in place when onboarding future employees.
The employment contract sets out the terms and conditions of the employment. This is the first document that would be considered if there was an employment dispute. Properly drafted written employment contracts are essential!
2. Determine which Modern Award applies to each employee
You might have several employees within the same business, but they may be covered under different Modern Awards. It might be that an industry award covers some employees, and an occupational award might cover other employees. For example, in a manufacturing company, the manufacturing staff might be covered by an industry award, but the office staff covered under an occupational award (clerical). You need to determine which Modern Award(s) apply and ascertain what conditions and minimum entitlements apply to that employee’s employment.
3. What classification does an employee fall under in the award
When you have ascertained which Modern Award(s) applies, you need to determine which classification each employee falls under. This will dictate that employee’s minimum hourly rate and other rates and penalties. Ensure that the employee is being paid the correct hourly rate, rates and penalties.
4. Reconcile any underpayments
If on an annualised salary (and covered under a Modern Award that provides for annualised salaries) you need to reconcile the days and times worked against the Modern Award, to ensure that the annualised salary covered what the employee ought to have been entitled to. An annualised salary for a Modern Award employee cannot be to the employee’s detriment. Just because they are receiving an annualised salary does not mean that they are required to work overtime for no additional pay.
5. Entitlements for employees not under an award
If the employee does not fall within a Modern Award they will have a common law contract. This means that essentially the employee and employer can agree on their own terms, however, the employee needs to be paid at least the national minimum wage.
What can employers do?
So essentially, employers need to be auditing their employment contracts, and ensuring that they are complying with their obligations under the Fair Work Act 2009 (Cth), Modern Award or Enterprise Agreement, and employment contract.
If employers fail to pay their employees correctly, they could be exposed to costly employment claims. It is not uncommon for employment claims to cost employers $10,000s (sometimes $100,000s, or in Calombaris’ case, millions!).
Taking the time and spending the money now, to ensure that the employment contracts are correct and ensuring compliance, can save employers the enormous amount of time and money of defending an employment claim later!
Do you need help?
If you need any employment law advice, please contact our Principal, Holly Edmondson, who would be glad to assist. Holly can be contacted on (07) 5636 5598 or via holly@blossomlawyers.com.au.
