When an inspector calls... 

While it may feel like a lot has changed over the years in industrial relations, something has remained the same - employers have an obligation to pay their workers correctly. This means getting their basic wage and duties allowances correct, calculating the right overtime, paying the full amount of holiday pay and ensuring that all entitlements are properly paid when an employee leaves.

To make sure employers are doing the right thing, Fair Work Inspectors have an obligation under the Commonwealth's workplace laws to investigate complaints. They may also conduct sector-wide audits of workplaces.

Having a Fair Work Inspector ("Inspector") show up at your business, may be quite confronting so if one does come knocking, what should you expect?

The Inspector has a right to enter your business during working hours but cannot enter by force. Before entering, or as soon as practicable afterwards, the Inspector must show you an identity card. Once on your premises, the Inspector has the right to:

• Inspect the work that's being carried out;
• Interview anyone (although that person can refuse to be interviewed);
• Inspect and make copies of documents;
• Ask questions about the location of documents; and
• Require documents to be produced within a certain time.

The Inspector may use assistants such as forensic accountants, translators and computer specialists to help in the investigation.

As an employer, the most important thing to do is remain calm. You should ensure you co-operate fully with the Inspector. If your business is being audited, you will be advised ahead of time so you can have everything ready.

If you have not been forewarned about the Inspector's visit, be open and honest about the documents you have and comply with any requests to produce documents for inspection. Remember, you may not have done anything wrong!

Of course, sometimes employers can make mistakes and inadvertently pay someone incorrectly. If the inspection reveals an error, it's in your best interests to make amends as quickly as possible. These two examples show why co-operation and speedy rectification will count in your favour.

Example 1

Pete owned a car detailing business. He employed 5 men, 4 of whom were under 21. He failed to pay any of the employees properly even when one of the fathers of the young employees confronted him. Pete tried to look like he was doing the right thing and gave one of the employees a cheque to cover his underpayments but then cancelled the cheque before the man had a chance to get to the bank. He avoided the Inspector and denied that he owed the employees anything. When he eventually agreed that the employees were owned money, he negotiated a payment plan but failed to make the first payment. He only paid the money when the matter got to court. Even though the total amount of the underpayments was only $4,500, the penalties imposed by the court on Pete's company and Pete himself were over $200,000*!

Example 2

Bill and Brenda owned a transport business. They had employed George for a number of years, first on a casual basis then on a permanent one. Because he'd started on an hourly rate, Bill and Brenda kept paying him on that basis, not realising that he should have been paid more under the award. As soon as the Inspector looked over their books and identified the error, Bill and Brenda took out a loan to pay George the $97,000 they owed him. Because of their co-operation, contrition and prompt repayment, their penalty was only $3,700**.

What if my employee makes a complaint?

The Inspector will talk to the employee and to you to try and identify if there is a problem. It may be that your employee has misunderstood an entitlement or it may be that you have made a miscalculation. At this stage, the main focus is on getting the parties to resolve their differences and to fix any problem that is identified.

What if we can't agree?

If the problem can't be easily resolved, the Inspector will continue the investigation to find out whether there has been a contravention of any Commonwealth workplace laws. You may be offered mediation as a way of resolving the dispute. If this doesn't work, then the Inspector will continue to investigate. If the Inspector finds you have breached the workplace laws, you'll be issued with a compliance letter or contravention notice telling you what the problem is and how to fix it. Do not ignore this!

If you agree with the letter or notice and can fix it, you should do so as quickly as you can. If you comply voluntarily, this will generally bring the investigation to an end.

If you think the Inspector has got it wrong, you should seek legal advice. Ignoring the problem and hoping it will go away may lead the court to think you were not co-operating and this can lead to a bigger penalty being imposed if a breach is found. Some very large penalties have been imposed on employers who were found to be unco-operative.

What can I do to avoid problems?

As an employer you must make sure you are comply with the relevant Commonwealth workplace laws. This means knowing:

• The minimum terms and conditions that apply to your workers under the relevant Award;
• The point at which overtime becomes payable and how it is calculated;
• Overtime that's payable when employees work on weekends, public holidays and RDOs;
• How many hours your employees actually work;
• The wages your employees actually receive; and
• All other entitlements such as annual and sick leave to which your employees are entitled.

If you are not sure you've got these things right, it will be well worth the time and money to consult a lawyer experienced in workplace law. You may want to work with the lawyer to conduct your own audit. If you discover an error, you can rectify it. If the audit doesn't show any problems, you can feel confident that your business complies with all the relevant workplace laws.

So, if the Inspector knocks, answer and co-operate. If a problem is found and rectified early, it will save you a lot of expense. Ignoring the problem won't make it go away; it may make it more costly and leave you open to negative publicity which could damage your business. Getting timely legal advice may also save you money - in one case, the court found that an employer who had retained a lawyer showed he was taking the matter seriously and this resulted in a reduction in the penalty imposed. You may not be able to avoid a penalty, but there's a lot you can and should do to ensure the penalty is as small as possible.

For further information or advice on this topic, please contact Mark Hemery, Principal, on mhemery@talbotolivier.com.au or Rochelle Airey, Law Graduate, on rairey@talbotolivier.com.au.

* Yates v Reiquin Pty Ltd (unreported, Magistrates Court of Victoria, Magistrate Hawkins, 17 July 2009).
** Kelly v Fitzpatrick [2007] FCA 1080.

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