workplace law

Pendlebury Workplace Law is a specialist workplace relations and employment law legal practice based in Sydney.

Message to the hair and beauty industry from Judge – “it does not pay to underpay workers”

A long history of employee complaints and the need to send a strong message to the hair and beauty industry that “it does not pay to underpay workers” has led to a hairdressing chain being fined $70,000 for short-changing an apprentice more than $8,000.

Federal Circuit Court Justice Riley said significant penalties were required to deter Cuts Only The Original Barber Pty Ltd, part of the Cuts Only Group, and its 2 directors from continuing to settle underpayment complaints by paying sums of money employees were “prepared to accept“.

Justice Riley fined the company $50,160 and each of the directors $10,032, the top of the range agreed with the Fair Work Ombudsman.

The penalties included 80% of the maximum fine for failing to pay the apprentice the minimum hourly award rate, plus lower percentages for overtime, penalty rates and annual leave breaches.

Justice Riley said the employer and its associated companies had been the subject of 10 underpayment complaints to the Fair Work Ombudsman (or its predecessor) between 2006 and 2012, including a prior complaint by the apprentice at the centre of the hearing.

None of these complaints had been brought to court but were instead settled by the company paying either an agreed amount or, in 6 of the cases, the full amount claimed.

Her Honour said, “Clearly, there is a difference between a complaint and a finding of a court, and the prior history in this case does not rise above the level of complaint.  However, the manner in which those complaints were resolved is reasonably indicative of a practical acceptance by the [companies] of wrongdoing.

The employee involved in the hearing accepted a one-off payment of $2,000 after her father complained that the company had not adjusted her wages after she moved from a 1st to 2nd year apprentice.  She then made a second complaint when the company did not pay her 3rd year wages when she reached that level.

While agreeing to cooperate with the Fair Work Ombudsman’s investigation and admit that the apprentice had been underpaid $8,625.71, Justice Riley said the company directors had also shown a lack of contrition by continuing to “persist in saying that they were misled… They have not acknowledged that it was incumbent upon them to ascertain the correct information.

Her Honour was also not convinced by the directors’ assurances that their engagement of a book keeper meant a less likelihood of similar future breaches, describing this assessment as “overly optimistic”.  “There was certainly no evidence before the court of who this book keeper is, or what he or she will be doing to ensure compliance by the first respondent with its employment law obligations.”

Justice Riley said the Fair Work Ombudsman evidence showed that of 456 hair and beauty industry-related complaints made to the Fair Work Infoline between 1 July 2013 and 31 March 2014, 57% were from people under 25 years of age, and 33% from apprentices or trainees.

She said while it was difficult to make comparisons because of a lack of evidence about overall employment numbers in the industry, “on any view, 456 complaints in 9 months is a lot… It is probably also fair to say, in accordance with common human experience, that there were probably a great many more people who experienced underpayments or other difficulties at work than actually went to the trouble of lodging a complaint,” she said.

Her Honour said that while the directors argued they should not be made scapegoats for non-compliance in the whole industry, “rightly or wrongly, general deterrence is a well-established corner stone of both civil and criminal penalties. It seems to me that there is a considerable need in this case for general deterrence”.

She said it was important to send a message to both the directors and the wider industry that “failure to underpay workers their correct entitlements is not economic” and penalties should be set at a level that makes clear that it “does not pay to underpay workers. Employers should be discouraged from calculating that they will be able to get away with underpayments often enough for it to be worth their while financially.”

Fair Work Ombudsman -v– Cuts Only The Original Barber Pty Ltd & Ors [2014] FCCA 2381 (22 October 2014)

Brooke Pendlebury
Sunday, November 2, 2014