The Federal Circuit Court (“the FCC”) has ordered that Mr Bijal Sheth, operator of a Brisbane cleaning company that is in liquidation (“the Company”), pay a “record” $126,540 personal penalty and almost $60,000 of back pay to the Company’s workers. The Fair Work Ombudsman (“the FWO”), which brought the legal action against Mr Sheth. This result highlights the willingness of the courts to impose significant personal penalties for worker exploitation.
The FCC found that Mr Sheth was “centrally involved” in the underpayments totalling $59,878 because he deliberately misclassified four employees as independent contractors despite the FWO having previously cautioned the Company following an investigation into 15 instances of underpayments and sham contracting. The Company paid the workers as little as $17 an hour.
The FWO could not pursue the Company for the underpayments as it had been placed into administration, so the FWO pursued Mr Sheth as being personally accountable under the accessorial liability provisions of the FW Act. The personal penalty represents the highest penalty secured by the FWO against an individual. The harsh nature of this penalty is likely due to the Company’s history of underpayments and the deliberate nature of the breaches of the Fair Work Act 2009 (Cth) (“FW Act”).
Fair Work Ombudsman Natalie James warned that “even if you liquidate your company, it’s no guarantee of avoiding the consequences of non-compliance with the Fair Work Act.” The take home message for companies and their key personnel is to ensure their workers are correctly classified as either employees or contractors, and to be aware that the accessorial liability provisions of the FW Act prevent key personnel from hiding behind the corporate veil to avoid personal liability.