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Enforceable Undertakings

Even during these challenging times, it is important to keep track of your employer obligations and ensure that you are paying your staff their correct entitlements.

In 2020 for example, allied health, disability and aged care services were among the first group of industries to receive a pay increase under Modern Awards, effective from 1st July 2020. Two major aged care operators entered into an Enforceable Undertaking with the Fair Work Ombudsman (FWO) in order to address issues of non-compliance.

Employers need to be aware that when wages are increased, allowances need to be increased accordingly. Failing to pay the correct allowances will effectively result in the unlawful underpaying of staff.

An Enforceable Undertaking (EU) is a written agreement between the FWO and an employer who hasn’t complied with their legal responsibilities under Australian Employment Regulations. EUs are used by the FWO instead of taking the employer to court over non-compliance, such as not paying employees in accordance with their Enterprise Agreement. The employer needs to agree to back-pay employees for wages not paid and be audited for future compliance.

▶︎ The operator of the Uniting Aged Care Homes is back-paying employees more than $3.3 million and has entered into an Enforceable Undertaking after it self-reported that it underpaid more than 9,000 employees, who were covered by a number of different Enterprise Agreements. The underpayments occurred as a result of errors made by Uniting in providing laundry, uniform and vehicle allowances, as well as failing to provide shift workers an extra week of annual leave they were entitled to each year.

▶︎ The operator of BaptistCare NSW & ACT is back-paying employees more than $1 million and has entered into an Enforceable Undertaking after it self-reported that it underpaid more than 2,000 current and former employees, who were also covered by a number of different Enterprise Agreements. As shift workers, under the Agreements, the affected employees were entitled to an extra week of annual leave each year. The underpayments were identified after the organisation discovered that it had failed to provide all the shift workers with the required additional annual leave, and the corresponding annual leave loading, since the implementation of the 2011 Agreement.

“This matter serves as a warning to all organisations that if you don’t prioritise workplace compliance, you risk underpaying staff on a large scale and face not only a massive administrative and logistical exercise but the cost of a significant back-payment bill. You also risk having to undertake further audits that satisfy the FWO that you are continuing to pay your workers properly." Fair Work Ombudsman Sandra Parker said.

The FWO’s 2019-20 Annual Report reveals a record sum of money recovered for underpaid workers across the country during the past financial year.

In total, $123,461,548 was recovered for 25,583 employees, which included $90 million in underpayments that were self-reported by employers. More than $56.8 million was back-paid following extensive investigations and Enforceable Undertakings negotiated with the FWO.

To mitigate the risk of underpaying staff, employers should regularly review their enterprise agreements and the relevant Modern Awards to ensure that all mandatory payments, including hourly rates, overtime, penalties and allowances, are being paid correctly. In addition, make sure you are using valid, well-drafted employment agreements.

For industrial relations support and practical assistance with workplace compliance, enterprise bargaining and business risk mitigation, please contact us today.

Further Reading:

🔹 Industrial Relations Reform – Is it time to revise your EBA? >

🔹 Employment contracts: 10 key points to getting them right >

🔹 Expensive penalties and massive back-pay for ignoring a compliance notice >