Employment Law Update - Civil penalty for late payment of entitlements
Key legal holdings
- Where a civil penalty provision under the Fair Work Act 2009 (Cth) is breached, an applicant may apply for an appropriate civil penalty to be awarded pursuant to section 546(1) of the Act.
- The theory underpinning the power in section 546(1) is to provide a financial disincentive which will encourage compliance such that contravening conduct is an economically irrational choice.
- The appropriate penalty for HEAD Oceania's contravention of section 90(2) of the Fair Work Act by failing to pay an employee's accrued annual leave upon termination of employment is $17,000.
Jurisdiction
Federal Court of Australia
Material facts
- The respondent company failed to pay the applicant the amount of $8,022.82 that would have been payable to him for accrued but untaken annual leave when his employment ended on 9 December 2021, until 30 March 2022.
- The respondent's director believed the applicant was not entitled to the payment based on incomplete records of his attendance, but did not verify this or seek advice before withholding the payment.
- The delay in payment caused the applicant distress and financial strain.
Applicable law
- Fair Work Act 2009 (Cth) ss 44, 90(2), 546(1)
Reasons for judgment
The failure to pay accrued annual leave upon termination was an objectively serious breach of the National Employment Standards under the Fair Work Act.
The delay caused material effect and distress to the applicant employee.
While the respondent did not deliberately flout the law, it failed to take adequate steps to ascertain its obligations, and ignorance of the law is no excuse.
The need for specific and general deterrence was increased due to the respondent being part of a large corporate group with significant resources.
The respondent ultimately cooperated by paying the amount, admitting the contravention and apologising, reducing the need for specific deterrence.
Decision
The Court imposes a pecuniary penalty of $17,000 on the respondent HEAD Oceania Pty Ltd, payable to the applicant.