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Employer fined nearly $533,000 in addition to back payment for cash back scheme

The Federal Circuit Court of Australia’s decision in Fair Work Ombudsman v Rubee Enterprises Pty Ltd & Anor [2016] FCCA 3456 (Rubee’s Case) has penalised a cafe in Albury NSW $532,900 for exploiting five foreign employees. This is the largest fine ever ordered as a result of legal action by the Fair Work Ombudsman (FWO).

The Federal Circuit Court of Australia’s decision in Fair Work Ombudsman v Rubee Enterprises Pty Ltd & Anor [2016] FCCA 3456 (Rubee’s Case) has penalised a cafe in Albury NSW $532,900 for exploiting five foreign employees. This is the largest fine ever ordered as a result of legal action by the Fair Work Ombudsman (FWO). The cafe was involved in a number of breaches of the Fair Work Act 2009 (Cth) (FW Act) including demanding employees pay back a portion of their wages, that is, engaging in a “cash back” scheme.

A “cash back” scheme is where an employer, who sponsors an employee, requires an employee to pay back a portion of their wages in cash to cover the costs of the visa or the “privilege” of being able to work. By adopting this practice, the employer would appear on the records to be meeting its legal requirements with respect to wages; however, this is not the case as once the employee makes the repayment to the employer, they are ultimately taking home below minimum wage.

Alternatively, an employer may make it a condition of an employee’s contract that if their employment is terminated or if they resign within a certain timeframe, they must reimburse the employer the cost of the visa. This is also unlawful for the purposes of immigration and employment law.

In Rubee’s Case, the employer was involved in a number of breaches of the modern award (relating to wages, penalty rates and overtime), National Employment Standards (failing to provide correct leave entitlements and notice) and creating false employment records. In addition to these breaches, the employees were promised wages in excess of $50,000 but after “cash back repayments”, they were left with as little as $6/hour. As a result, the employees were underpaid amounts between $8,946.89 and $32,063.84 over the period of their employment. The employees were told that if they did not pay back portions of their wages, their employment might be terminated, visa support withdrawn or worse.

The Court found that the “cash back” scheme was a “deliberate strategy of deceit to hide the ongoing contraventions of workplace laws” and that there was a deliberate exploitation of the balance of power between the sponsor and the visa holder to achieve a financial gain. Further, the Court stated that the “disparity between the promised annual salary and the amounts in fact paid demonstrates the particular cruelty of the minimal payments.” The Court made it very clear that it was taking the exploitation of vulnerable employees very seriously and wanted to use this case as a form of deterrence to other employers as the hospitality industry is “notorious for non-compliance.” As a result, in addition to the penalties, the Court ordered that the Director and the Company back pay the five employees in full.

The “cash back” scheme is not a new concept. In 2015, it was found that 7-Eleven workers were also caught up in a “cash scam” where they received the correct award rate into their nominated back accounts for the hours they had worked but were expected to pay part of it back to the franchisee in cash, away from the surveillance cameras.

The FWO has made it very clear that it will be pursuing employers in the hospitality industry with respect to “cash back” arrangements. Employers are reminded that when they ask an employee to pay back part of their wages or spend their wages in particular ways, it is considered unreasonable and is a breach of the FW Act. Further, the courts have made it very clear that exploitive cash back arrangements will not be tolerated and employers will be heavily penalised.

To address the problem of “cash back” schemes and further strengthen laws prohibiting cash back arrangements, the Federal Government introduced the Fair Work Amendment (Protecting Vulnerable Workers) Bill. If made into law, corporate entities will face increased penalties for deliberately and systematically underpaying workers.

 

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