Franchise fined nearly $100,000 by watchdog for poor record-keeping

A former Caltex franchisee has today been handed nearly $100,000 in penalties by Australia’s Fair Work Ombudsman over serious breaches of the watchdog’s record-keeping laws.

The Sydney-based Five Dock store was first pulled up before the Ombudsman last year over allegations the franchisee had underpaid six international workers, but on investigation, the documents provided to the Ombudsman did not accurately reflect the wage rates the company had paid to the employees.

The workplace watchdog then requested further information from the company’s accountant, superannuation fund, and bank, which did not match up with the information originally provided to the Ombudsman by the company. The company was then taken to court over alleged falsification of records, which the Federal Circuit Court this month found it to be guilty of.

The franchisee, Aulion Pty Ltd, and its director were both fined, with the franchisee copping an $80,190 penalty and the director $16,038, for a total penalty of $96,228.

The penalties are the highest secured by the workplace ombudsman in a case that relates solely to record-keeping and pay slips.

A lack of consistent records available to the Ombudsman meant the regulator was unable to determine if allegations that workers at the Caltex franchise were being paid just $12 an hour were correct, something that Fair Work Ombudsman Natalie James said “frustrates” investigations.

In a statement, James pointed out that if the same breaches occurred today, the penalties could be significantly higher thanks to legislation that was passed in September last year aimed at protecting vulnerable workers.

The changes to the Fair Work Act significantly increased penalties — up to 10 times — for failing to keep records, and introduced a reverse onus of proof on employers who fail to meet record-keeping or payslip obligations.

“Financial penalties for failing to keep records and issue pay slips have significantly increased and any unscrupulous employer that frustrates a Fair Work Ombudsman time-and-wages investigation by using false records can now face prosecution in criminal court,” James said.

Under the old rules, companies could have faced a maximum fine of $63,000 for contraventions, but under new legislation the fine for “serious contraventions” now caps out at $630,000.

Record keeping a focus for SMEs

Speaking to SmartCompany, employment lawyer Peter Vitale says the courts and the Ombudsman have put a repeated focus on record-keeping obligations for business owners as it is often the only way to determine workers are receiving their correct entitlements.

In this case, Vitale believes there’s “no doubt” the deliberate nature of the falsifications played a “significant part” in the size of the penalty.

“If the breaches had occurred after September last year, the company could absolutely face a much more significant fine if the contravention was found to be serious,” he says.

Vitale notes that SMEs doing the right thing when it comes to record-keeping and payslip obligations shouldn’t need to worry too much about the Ombudsman’s crackdown in the area. Even though the watchdog can issue on-the-spot fines for poorly kept records, litigation is unlikely unless business owners fail to cooperate.

“What will normally happen is the FWO will work with the employer to help them get their house in order, and if there’s any indication of underpayment as a result of poor record keeping, usually the first step is to try and help correct that without litigation,” he says.

“This case does highlight the importance of record-keeping and the focus placed on it by the courts and the FWO. It also illustrates if you haven’t got your records in order, the risk is increased substantially with the newly introduced legislation.”

Aulion Pty Ltd was sold in October 2017 to a franchisor-approved third party, but has since entered liquidation. Liquidator Mali Thaggard told SmartCompany the sale “allegedly resulted in a shortfall on the company’s debts at that time”, which the director drew from his superannuation to meet.

“The subsequent $80,190 liability against the company on 5 June 2018 came at a time the company no longer had a business or funds to meet payment of that judgement debt. This resulted in the company’s insolvency and need to be placed into liquidation,” Thaggard said.

“The sale of the Caltex Five Dock service station will form part of my review and investigations during the liquidation to assess whether the sale was achieved for proper value in the circumstances.”

In a statement to SmartCompany, a Caltex spokesperson said the operator of the store had left the Caltex network prior to the penalties imposed by the Fair Work Ombudsman, but Caltex is continuing to work with the Ombudsman where possible.

“Caltex has been and continues to work with the Fair Work Ombudsman who investigated some Caltex-franchised sites. The Ombudsman has an important role to play in ensuring compliance with Australian workplace laws, and has powers to take action where they find non-compliance with those laws,” the spokesperson said.

“We have taken the actions we are permitted by the relevant Codes and under our agreements with franchisees.”

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