How Sushi Bay’s $15.3M penalty for migrant worker exploitation reveals payroll compliance issues

Record penalties for exploitation of migrant workers

In a landmark case highlighting the critical importance of compliance in the migration and employment sectors, the Australian Federal Court has imposed record penalties of $15.3 million on Sushi Bay outlets across New South Wales, Darwin, and Canberra. This recent case, adjudicated under the Protecting Vulnerable Workers laws, underscores the severe consequences of failing to uphold fair employment practices and serves as a powerful reminder of the need for ethical and legal employment standards.

Employers across Australia should review their practices, policies, and procedures to align with the increasingly complex legislative regimes.

What you need to know: Key takeaways for employers

The Federal Court's ruling announced on 6 August 2024 revealed that 163 workers—predominantly Korean nationals on student, working holiday, and skilled worker visas—were underpaid over $650,000 between 2016 and 2020. Despite previous warnings and penalties, the offending company continued to exploit its workforce, resulting in significant financial and reputational damage.

Understanding ‘serious contraventions’

The court categorised the breaches as ‘serious contraventions’ under the Protecting Vulnerable Workers laws, attracting up to ten times the usual maximum penalties. This severe penalty underscores the importance of recognising and rectifying serious violations promptly. Employers must be acutely aware that repeated or egregious breaches can lead to substantially higher fines and legal repercussions.

Navigating sponsorship obligations

The referral of the case to the Department of Home Affairs highlights the potential for additional scrutiny on sponsorship obligations. Employers must be diligent in adhering to the terms of their sponsorship agreements. Breaches can lead to severe penalties, including fines and restrictions on future sponsorships. Ensuring that all sponsorships comply with the legal framework is not only a legal obligation but also critical for maintaining the ability to recruit and retain skilled workers.

Comprehensive review of practices

The Fair Work Ombudsman’s involvement emphasises the necessity for employers to conduct thorough reviews of their employment practices. Regular audits and assessments of compliance with wage rates, working conditions, and visa obligations are crucial. Employers should ensure that their policies align with legal requirements and that all staff, particularly those on temporary visas, are fairly compensated and treated according to the law.

Compliance with pay obligations

The Australian industrial relations landscape is complex, with varying obligations across a myriad of industrial instruments including awards, enterprise agreements and legislation. Employers should be aware of the industrial instruments that govern their workforce, including any specific allowances and other entitlements that they are required to pay their employees. Wage underpayments are taken incredibly seriously by the Fair Work Ombudsman, and the Commonwealth and various Australian jurisdictions have also criminalised ‘wage theft’.

Employee records and pay slip obligations

Accurate and meticulous record-keeping, as well as the provision of pay slips to employees, is critical for compliance with Fair Work Ombudsman regulations. Employers are obligated to retain detailed records of hours worked, pay rates, leave, superannuation contributions, individual flexibility agreements, and other relevant information for a period of seven years. These records are vital for the Fair Work Ombudsman to effectively investigate complaints, conduct workplace audits, and enforce compliance with employment standards.

Enhancing ethical standards

This case serves as a powerful reminder of the importance of ethical employment practices. Maintaining high standards not only protects your business from legal and financial penalties but also fosters a positive workplace culture. Employers should invest in training and resources to support compliance and ethical behaviour within their organisations.

Steps to ensure compliance

To mitigate risks and ensure compliance, we advise employers to consider the following steps:

• Conduct regular compliance audits: Regularly review employment practices, pay structures and wage compliance to ensure alignment with legal standards, fair treatment of all employees and compliance with any governing industrial instruments.
• Record retention: Implement and maintain a comprehensive system for recording and storing employee data, ensuring that all records are accurate and retained for a minimum of seven years. It is essential that these records are readily accessible and up-to-date.
• Issuance of pay slips: Ensure that pay slips are issued to employees in compliance with Fair Work Ombudsman requirements. Each pay slip should clearly detail the employer’s and employee’s names, the pay period, the date of payment, gross and net pay, any applicable loadings, pay rates, deductions, and superannuation contributions.
• Implement comprehensive policies: Develop and enforce clear policies on employment practices, wage rates, and visa obligations. Ensure these policies are communicated effectively to all staff and management.
• Provide training and resources: Invest in training programs for HR and management teams to stay updated on regulatory changes and best practices.
• Engage with experts: Partner with migration and employment law experts to navigate complex regulatory landscapes and address any compliance issues proactively.

BDO advice and expertise

At BDO, we remain committed to providing expert guidance in Migration Services and Payroll Advisory, ensuring both compliance and ethical conduct.

As a leader in migration services, we recognise the complexities of immigration law. Our team of legal specialists provide comprehensive advice to corporate and private clients. We work collaboratively with our Payroll Advisory specialists who understand the challenges that Australia’s industrial relations landscape and employment tax environment presents to employers.
Together, we offer a holistic approach to address your needs.

Contact our team to learn more.