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The Fair Work Ombudsman (FWO) recently released its Annual Report for 2020-21, providing insights into its enforcement work over the last financial year and its goals for the year ahead.
- FWO’s compliance and enforcement priorities remain largely unchanged for the current financial year. Large corporate underpayment matters remain a key focus of FWO’s enforcement activity.
- Compliance notices are a primary enforcement tool in FWO’s approach to payroll non-compliance, and it is increasingly willing to litigate in cases involving complex, deliberate or serious non-compliance.
FWO’s key enforcement tools
A review of FWO’s ‘performance snapshot’ reveals a steep increase in its enforcement activities in the last few years. In 2020-21, FWO recovered $148.4 million for over 69,700 workers. This is a 20% increase on 2019–20 and nearly five times the recoveries achieved in 2017–18.
FWO’s approach to compliance and enforcement appears to have crystallised over the past financial year, with compliance notices becoming a widely used enforcement tool. FWO issued 2,025 compliance notices in the last financial year (recovering $16.5 million) compared to only 220 compliance notices in 2017-18 (recovering $0.95 million). The Annual Report states that, in the context of underpayment matters, compliances notices are now the primary enforcement tool as they allow FWO to perform its statutory functions in the most efficient and economic manner. The exception to this is complex, deliberate or serious cases of non-compliance where FWO may consider litigation to be more appropriate. FWO’s increased willingness to litigate has been demonstrated by the 41% increase in litigated matters between 2019-20 and 2020-21.
Compliance and enforcement priorities
In July 2021, FWO updated its priorities for the 2021-22 financial year, again focusing on large corporate underpayments, franchise arrangements, sham contracting, horticulture, fast food cafes and restaurants, and also adding contract cleaning.
FWO’s Annual Report indicates that it remains particularly focused on the horticulture, hospitality and franchise industries, with these industries identified as being at higher risk of payroll non-compliance. The hospitality industry has seen the highest number of disputes referred to FWO each year, and 36% of all anonymous reports received by FWO last financial year related to that industry. FWO are trying to address the concerns in these industries with targeted educational materials (such as its horticulture showcase website and educational campaigns promoting industry specific tools), as well as through conducting surprise audits of employers in various regions around the country.
Large corporate underpayments also remain a key concern for FWO. According to its Annual Report, FWO received 49 self-reported underpayment issues last financial year, including from large corporate entities. Self-reported non-compliance matters resulted in back payments of over $100 million for more than 54,500 employees. FWO considers that non-compliance in this space was largely driven by ineffective governance and systems of internal controls to monitor, detect and address non-compliances. Amongst other things, FWO identifies annualised salary arrangements and ‘setting and forgetting’ annualised salary amounts which become insufficient over time to meet minimum entitlements as key risk areas for employers.