Company’s Plan to Avoid Payment Obligations Goes up in Smoke

Jun 3rd, 2022

The operators of a vaping products company are the subject of pending legal action by the Fair Work Ombudsman for allegedly requiring a worker to illegally take money out of his pay and entitlements, and repay this to the employer.

The employee was a visa holder sponsored by the company as a marketing specialist between 2017 and 2020. After receiving a request for assistance, Fair Work inspectors allegedly found that the employee paid approximately $13,000 to the employer between July 2017 and March 2018, withdrawing cash of up to $2000 from his pay on several occasions to pass on to the employer.

The company director and her husband, the company’s operations and finance manager, allegedly informed the employee in private that the cashback was required because they were able to sponsor his visa but could not afford to pay the minimum annual wage for his position.

After being approached by the FWO, the company fully back-paid the employee last year. The FWO is now seeking penalties against the company and its owners for serious breaches of the Fair Work Act. The company could be required to pay penalties up to $63,000 and each owner could face penalties of up to $12,600.

A directions hearing is scheduled on 3 June 2022.

This case serves as a reminder that employers cannot avoid their payment obligations to employees by asking them to repay their wages or entitlements. The FWO is available to provide assistance to employees who fear their entitlements have been breached and is willing to take legal action against employers to secure penalties.

The Key Takeaway:
There are limited circumstances where an employer can reasonably deduct money from an employee’s pay or request a repayment. An employer may only deduct money if:

  • the employee agrees in writing and its principally for the employee’s benefit
  • its allowed under law, a court order, or by the Fair work Commission, or
  • the employee’s award allows it, or
  • the employee’s registered agreement allows it and the employee agrees to it.
An employer cannot require an employee to pay back their wages, or spend it in a certain way, if it is unreasonable or principally for the employer’s benefit.

Where a deduction or repayment is reasonable, employers must still ensure that they comply with the requirements under the Fair Work Act and/or the relevant industrial instrument. In most cases, there must be a written agreement and the employee must genuinely agree to the deduction or payment to be made.  

Common permissible deductions are salary sacrificing arrangements, or additional superannuation contributions.

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