Enforceable undertakings used by FWO

Analysis

Enforceable undertakings used by FWO

The Fair Work Ombudsman may use an enforceable undertaking to formalise an arrangement where an entity in breach has voluntarily complied with the Fair Work Act after an investigation by a Fair Work inspector. Here is a summary of the process.

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The Fair Work Ombudsman (FWO) may use an enforceable undertaking to formalise an arrangement where an entity in breach has voluntarily complied with the Fair Work Act after an investigation by a Fair Work inspector. Here is a summary of the process.

Under the Fair Work Act 2009 (s715), an enforceable undertaking may be applied if the FWO reasonably believes that a person or an employer has contravened a civil remedy provision, for example, underpayment of wages or an alleged breach of the National Employment Standards (NES).

When the FWO investigates alleged contraventions of the Act, and the allegation is proven, enforcement measures (including the acceptance of enforceable undertakings, the issue of compliance notices, or the commencement of legal proceedings) may be used to secure compliance.

A table of all civil remedy provisions relating to the Fair Work Act is contained in s539 of the Act.

What is an enforceable undertaking?
 
An enforceable undertaking (EU) is a written deed executed between the entity in breach and the FWO which contains:
  • an admission of contraventions
  • an agreement by the entity in breach to perform specific actions to remedy the contraventions (eg by creating a payment plan to rectify underpayments, making an apology, printing a public notice)
  • a commitment to certain future compliance measures such as regular internal audits, training for managers and staff, implementing compliance measures, future reporting to the FWO.
The FWO issues Guidance Notes on various matters, including enforceable undertakings.

The following (below) is an extract from the relevant Guidance Note on the FWO website that identifies when the FWO may accept an enforceable undertaking. [Note: a Guidance Note may be subject to change.]:
‘A decision by the FWO to accept any EU does not create a binding precedent on the FWO. Previous acceptance of an EU does not mean the FWO will accept such an arrangement with the same person or entity in the future.

When the FWO may accept an EU
 
The FWO may consider acceptance of an EU where:
  • he reasonably believes the person or entity has contravened a civil remedy provision of the FWAct;
  • it is in the public interest and appropriate in all the circumstances to resolve the matter through a formal enforcement outcome; and
  • the contravention is admitted and the employer is willing to cooperate with the FWO.
A relevant consideration is whether the objectives of other compliance mechanisms can be achieved through acceptance of an EU, without, for example, the expense and delay associated with litigation.

The FWO cannot accept an EU in circumstances where a Compliance Notice has been given in relation to the contravention. The FWO cannot accept an EU in relation to any conduct that gives rise to a criminal offence under the FWAct.’
Contents of an EU — example
 
Earlier this year, WorkplaceInfo reported a matter involving an employer entering into an EU with the FWO regarding underpayment of wages and allowances in contravention of the applicable modern award. The underpayments were discovered after an investigation by the FWO that revealed five employees had been underpaid. After voluntarily reimbursing the five workers their outstanding entitlements, the company conducted a self-audit to determine whether other employees had also been underpaid.

The employer subsequently identified that it had inadvertently failed to update its payroll system to take account of transitional arrangements under the applicable modern award. It calculated that 112 of its 209 employees had been underpaid their meal allowance. The underpayments were then rectified.

Following the employer’s cooperation and agreement to voluntarily rectify all outstanding arrangements and put systems in place to ensure the problem did not re-occur, the FWO entered into an EU with the employer as an alternative to litigation.

As part of the EU, the employer expressed its ‘sincere regret’ for its failure to comply with workplace law and issued a public apology to the affected employees. In addition, the employer was required to:
  • commission the preparation of a workplace relations compliance manual and make it available to staff
  • ensure all staff with human resource and payroll responsibilities, together with site managers, attend a workplace relations training course
  • engage an independent specialist to audit its compliance with workplace law each year for the next three years
  • provide a copy of the report to the FWO.
Examples of EUs accepted by FWO can be found on the its website.

Failure to comply with an EU
 
In the event of non-compliance with an EU, the FWO may apply to the Federal Court, Federal Magistrates Court or an eligible state or territory court for an order directing the employer to comply with the terms of the EU. The court may also make an order directing the employer to pay compensation to a person who has suffered loss because of the contravention of the EU, and any other orders that the court considers appropriate.

Contravention of an EU does not itself attract a civil remedy.

Source: Paul Munro, IR Consultant.
 
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