A recent case in the federal jurisdiction has imposed punishing penalties on an employer for implementing a cash back scheme with an immigrant employee, that is, the employer “paid” monies to an employee and the employee was required to pay the amount back immediately.

An accounting firm that knowingly misled a Fair Work Inspector investigating its exploitative cashback scheme has been ordered to pay total penalties of $177,000 by the Federal Circuit and Family Court.

Judge Gillian Eldershaw found a clear need for penalties to deter the company and its director, noting their “disregard for their obligations” owed to a part-time assistant accountant.

The company and director required the assistant accountant to deposit money into accounts controlled by them, which they then transferred back to her in the form of wages, falsely giving the appearance that she had been paid.

“I accept that the [company and its director] have corrected the contraventions, but that is against the background of the tardiness of so doing, combined with the provision of false and misleading information to the Fair Work Inspector,” Judge Eldershaw said.

“In these circumstances, the penalty must be set at a level that sends a clear message to the public that such an approach is unacceptable.”

She found that when the Fair Work Inspector began investigating accounting and financial services company Innovative Associates Pty Ltd and its sole director Dila Ram Kharel in 2021, they knowingly provided false or misleading documents.

Specifically, they provided 12 payslips reflecting inaccurate payment dates, or that didn’t reflect the hours worked by the assistant accountant.

Noting the inspector’s statutory function is to monitor employment in the public interest, Judge Eldershaw said the penalty imposed had to reflect that such conduct will not be tolerated.

Worker paid her own wages

Judge Eldershaw heard Innovative Associates and its director employed the Nepalese national from July 2019 until December 2020.

The company and its director required the assistant accountant, on a temporary graduate visa at the time, to pay them amounts covering her wages, superannuation contributions, and tax.

In total, she paid $32,907 into the company and director’s bank accounts, of which they only paid $27,873.50 back to her in the form of wages.

They implemented the cashback scheme to give the false appearance that they paid the worker her entitlements, Judge Eldershaw heard.

The company and director admitted they also failed to keep required records and give the assistant accountant timely payslips, while it provided her false or misleading payslips that did not reflect the hours she worked.

Including unpaid leave and penalty rate entitlements, the company and director underpaid the assistant accountant a total of $40,164.49.

The company and director didn’t start paying her back until 2023, two years after the Fair Work Inspector’s investigation started.

Contraventions deliberate, caused detriment

The Fair Work Ombudsman proposed the court order a $148,000 penalty against Innovative Associates, and a further $29,000 against the director.

Weighing the penalties to impose, Judge Eldershaw accepted the company and director deliberately flouted the Fair Work Act.

“The entitlements in question include minimum entitlements intended to provide a safety net for employees, and it follows that their contravention has occasioned detriment to [the worker],” she said.

“[The assistant accountant] was working for minimum wage and, I infer, could ill-afford to be held out of being paid her lawful entitlements for any period, let alone the time that elapsed.”

Further, Judge Eldershaw said she accepted that the company and director gained a commercial advantage through their conduct.

“I am satisfied that the proposed penalties are appropriate. . . in that they strike a reasonable balance between oppressive severity and the need for deterrence,” the judge said.

In a statement issued after the decision, Fair Work Ombudsman Anna Booth said the case underlines that exploiting workers through unlawful cashback schemes is serious conduct that will not be tolerated.

“Unlawful cashback schemes are one of the most blatant and appalling forms of exploitation and we are committed to holding the perpetrators of such schemes to account”, she said.

“We also have no tolerance for allegedly knowingly providing our inspectors false or misleading records,” Booth said.

Lessons for employers

Despite this being an extreme and obnoxious attempt to circumvent industrial laws, the main lesson is to ensure that you comply with any investigation with the Fair Work Ombudsman, keep accurate records (and never ‘create’ or manufacture false employment records) and to seek advice on employment obligations on a regular basis.