Employers are responsible for making and keeping accurate employee records. Record-breaking fines have been issued to employers for contraventions of employee record-keeping obligations, such as details of overtime hours, penalty rates and loadings.

A Caltex franchisee and its owner were fined $80,190 and $16,038 each for falsifying employee records of the wage rates paid to migrant workers and failing to provide payslips on time. Employers should read on to find out more about the Fair Work Ombudsman (FWO)’s recent Caltex investigation.

The facts

The FWO gave the former Caltex franchisee Notices to Produce that required Caltex to send the FWO their employees’ records, including contracts of employment, time-and-wages records, pay slips and earnings. These documents were given to the FWO. FWO suspected that the records were not accurate and issued further Notices to Produce to third parties: a bank, a superannuation fund and the Caltex franchisee’s accountant. The FWO prosecuted the franchisee and its owner, Mr Dagher, in the Federal Circuit Court. The Court held that Mr Dagher and his company falsified documents and records. Mr Dagher and his company, Aulion Pty Ltd, were each fined $16,038 and $80,190. 

Key Principle

Courts can issue heavy penalties for breaches of employee record keeping obligations. These are set out in Section 535 of the Fair Work Act 2009 (FW Act) and the Fair Work Regulations 2009 (FW Regulations).

A failure to make and keep certain employee records will result in a contravention of the FW Act and Regulations and may result in civil penalties of up to $63,000 for a corporation and $12,600 for an individual involved in a contravention. Higher penalties were recently introduced for serious contraventions of up to $630,000 for a corporation and $126,000 for an individual.

Additionally, the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 (effective since September 2017) increased the penalties for breaches of record-keeping and pay slip obligations and reversed the onus of proof in court for employers who fail to give a reasonable excuse for their failure to meet record-keeping obligations or pay slip obligations. Employers will now have to disprove wage claims made in court.

Employee record keeping obligations under the Fair Work Act

Under Section 535 of the FW Act, an employer is required to make, and keep for 7 years, employee records as prescribed by the FW regulations. These records must be legible, in the English language and readily accessible to an inspector, and must not be altered unless for the purposes of correcting an error and must not be false or misleading to the employer’s knowledge.

An employer must make and keep the following employee records:

• Content: Records of the employer and employee’s name, whether the employee’s employment is full-time, part-time, permanent, temporary or casual, the date on which the employee’s employment began and the ABN of the employer on or after 1 January 2010 (Reg 3.32).
• Pay: Records of the employee’s rate of remuneration paid, the gross and net amounts paid, deductions made from the gross amount paid, records of the hours worked by an irregular part-time or casual employee and details of an employee’s incentive-based payment, bonus, loading, penalty rate or another monetary allowance or separately identifiable entitlement (Reg 3.33).
• Overtime: Records specifying the number of overtime hours worked by an employee each day or when the employee started and ceased working overtime where a penalty rate or loading must be paid for overtime hours actually worked by an employee (Reg 3.34).
• Averaging of hours: a copy of the agreement where an employer and employee agree in writing to an averaging of the employee’s hours of work (Reg 3.35).
• Leave: A record of any leave the employee takes and the balance (if any) of the employee’s entitlement to leave from time to time where an employee is entitled to leave (Reg 3.36(1)). Where an employer and employee agree to cash out an accrued amount of leave, a copy of the agreement must be kept and a record of the rate of payment for the amount of leave that was cashed out and when the payment was made (Reg 3.36(2)).
• Superannuation Contributions: the amount of the superannuation contribution, the period, date and name of any fund to which the contribution was made and the basis on which the employer became liable to make the contribution (Reg 3.37).
• Individual flexibility arrangement: a copy of the agreement and a notice or agreement that terminates the agreement where an employer and employee agree in writing on an individual flexibility arrangement (Reg 3.38).
• Guarantee of annual earnings: Records of a guarantee where an employer gives a guarantee of annual earnings under Section 330 of the Act and records of the date of revocation where an employer revokes a guarantee of annual earnings under Section 330 of the Act (Reg 3.39).
• Termination of employment: Records setting out whether an employee’s employment was terminated by consent, notice, summarily or in some other specified manner and the name of the person who acted to terminate the employment (Reg 3.40).
• Transfer of business: Records in relation to an old employer, a new employer and a transferring employee in the event of a transfer of business (Reg 3.41).
• Inspection and copying of a record: An employer must make a legible copy of an employee record available for inspection and copying on request by the employee or former employee to whom the record relates (Reg 3.42(2) and (3)). Where the employee record is kept at the premises where the employee/former employee works, the employer must make the copy available within 3 business days after receiving the request or post a copy of the record, within 14 days after receiving the request, to the employee/former employee (Reg 3.42(3)). Where the employee record is not kept at the premises, the employer must as soon as practicable after receiving the request make the copy available at the premises or post a copy of the employee record to the employee/former employee (Reg 3.42(4)).
• Information concerning a record: Where an employee or former employee requests that an employer make a copy of an employee record available for inspection, the employer must tell them where their records are kept and can interview the employer or employer’s representative at any time during ordinary work hours about an employee record the employer has made or will make (Reg 3.43).
• Accuracy: Employers must correct a record that the employer is required to keep under the Act or Regulations as soon as the employer becomes aware of an error (Reg 3.44(2)).

If you require advice about whether your employment record-keeping systems are compliant, contact Peter McNamara.