Parent company faces legal proceedings over annualised salary infringements of its subsidiaries

The Fair Work Ombudsman (FWO) has commenced legal action against Super Retail Group Limited (SRG) and its subsidiaries for the alleged underpayment of employees of more than $1 million.

The watchdog began investigating what it alleges are 'serious contraventions' under the Fair Work Act, after SRG self-reported the widespread underpayments of employees to the FWO and the ASX in 2018. The subsidiaries being investigated are Super Cheap Auto Pty Ltd, Rebel Sport Ltd, SRG Leisure Retail Pty Ltd (BCF and Ray's Outdoors) and Macpac Retail Pty Ltd.

The case involves a sample of 146 employees who were allegedly underpaid a total of $1.14 million for their work between January 2017 and March 2019. The majority of the underpayments involve the subsidiaries paying employees annual salaries that did not meet minimum award entitlements, largely due to a high level of overtime worked by the employees.

The FWO took action despite SRG's self-reporting of the underpayments and SRG's attempts to remedy the mistakes with back-pay. The FWO's position is that SRG's remediation program "has resulted in only partial back-payment" of the sample employees and that SRG and its subsidiaries knew the overtime contraventions were occurring from April 2017 but failed to take action to address the matter until January 2018.

The FWO has recently been given expanded powers and financial resources and this case highlights that it will go to the very top, including parent companies if necessary, to ensure employer obligations are fulfilled. Further, Fair Work Ombudsman Sandra Parker says annualised salaries in particular have become "a persistent issue for businesses across many industries" and that "every employer should be clear that if annual salaries do not cover all minimum lawful entitlements for all hours actually worked, the results can be substantial back-payment bills, plus the risk of significant court-ordered penalties".

‍Warning for Employers

• Employers who do not meet award obligations, including in respect of annualised salaries, are at risk of prosecution and substantial fines. This is the case even if the employer takes steps to remedy the problem.
• Employers should act swiftly to remedy any errors. The considerable delay appears to be one of the deciding factors in the FWO's decision to prosecute in the SRG case.
• SRG inaccurately calculated back-pay owed which was another factor leading to FWO prosecution. Accordingly, when an employer identifies an error, legal advice should be sought immediately to ensure that the problem is rectified correctly and swiftly.
• Annualised salaries can be problematic in relation to employees covered by awards. It is prudent to seek legal advice to ensure that employees are receiving their entitlements in full.

If you require assistance in relation to any of the information provided above, Pragma's Employment lawyers can provide advice to you and your business to minimise your future risk. Contact us today by clicking here or call us on (08) 6188 3340.