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Federal Court shines a light on piece rates

By Charles Power on September 13th, 2019
  1. Industrial Instruments
  2. Fair Work Act

Some modern awards provide for an employer to agree to pay employees a piecework rate.  A piecework rate is an amount paid on completion of a specified task.

For instance the Horticulture Award provides that an employer and an employee can agree on a piecework rate, provided it enables the employee to earn not less than 115% an hour than the minimum hourly rate prescribed in the Award for the type of employment and the classification level of the employee. If the rate is adequate, the employer is exempt from compliance with other Award provisions dealing with overtime and meal allowances.

In Fair Work Ombudsman v Hu (2019) the Full Federal Court dealt with an appeal brought by the Fair Work Ombudsman (FWO) in its prosecution of a labour hire company supplying casual mushroom pickers to a Victorian farmer.

The FWO argued that:

  • when an employer and employee entered into a piecework agreement that provides for an inadequate piecework rate, this exposed the employer to contravention of the other Award provisions that would not have applied if the piecework rate was at the right level;
  • if the piecework rate was an inadequate piecework rate, the employee’s pay rate automatically defaults to the minimum wage provided for in the Award; and
  • the farmer was ’knowingly involved’ in the Award contraventions of the employer and was therefore also liable.

The majority of the Court ruled that the contravention of the Award piecework provision was the actions of the employer in entering into an agreement that provided for an inadequate rate. The employer was not continuing to contravene the Award during the period that it paid the inadequate rate.

The majority also rejected the argument that non-compliance with the minimum piecework rate meant that the employee should be paid in accordance with the non-piecework provisions. 

An employee who has entered in a piecework agreement under the Award did not cease to be a pieceworker because the agreement is non-compliant. It simply meant the employer is in breach of the Award provision dealing with piecework.

On the question of the farmer’s accessorial liability, the majority observed that this would require that the farmer have actual knowledge, rather than imputed knowledge of the underpayment by the labour hire company, and to have engaged in some conduct that connected the farmer, in a practical way, to the underpayment.

In this regard, the farmer knew that the pickers were being paid 80 cents per kilogram of mushrooms picked. If the farmer knew the pickers were casuals, then he should have known that the relevant rate was 91 cents a kilo.  This would have been actual knowledge of the underpayment.

The Court considered whether the farmer knew that the pickers being supplied were casual employees. The Court decided that the farmer probably had a suspicion that the employees were casuals, but this was not enough to conclude that he had actual knowledge.

This is despite the farmer having in his possession a document in which the calculation of pay rates was done by adding a casual loading. He needed to have been told the workers were casual workers or provided their employment agreements.

What would an FWO audit of your business reveal?

Can you prove that every action you have taken is legally compliant?

Any breach of the Fair Work Act, even if it’s unintentional, can result in a hefty penalty.

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