FEDERAL COURT LAYS DOWN THE LAW ON PIECE RATES AND ACCESSORIES TO BREACHES
We are regularly asked for guidance on how to set piece rates. It is a pressing issue for Growers as if an error is made it will be a compound error resulting in significant exposure to back-pay. In July 2018, the Federal Court handed down its decision in the case of Fair Work Ombudsman v Hu & Marland Mushrooms.
The Fair Work Ombudsmen alleged that the piece rates paid to mushroom pickers by a contract picker (HSR Country) were too low and that the farm owner (Marland Mushrooms QLD Pty Ltd) and its director (Troy Marland) knew the rate was too low and should be responsible for the shortfall paid to workers.
This case raises two very significant issues:
- How to calculate and understand piece rates;
- Can farm owners and directors be responsible if a contractor underpays pickers.
How To Calculate And Understand Piece Rates
For those on the Horticulture Award, piece rates must be set to allow the “average competent employee” to earn 15% above the minimum hourly rates. For a casual employee, the calculation of piecework rates will include the casual loading. For those on an Enterprise Agreement – check the wording of your Agreement.
The Federal Court took a statistical approach to determine that over a period of 12 months there were only a small group of employees who earned the above rates or more. Therefore, the Court concluded that the rate was set too low. This approach of looking at historical pay records does not help Growers to set the correct piece rate today.
The Court didn’t say how many or what percentage of employees should have earned the piece rate target, however, I suggest that where records show that where less than 50% or 60% of employees on any day earn the piece rate target, Growers should be concerned and have a good reason why this shortfall occurred. Good reasons might include the fact that all employees were new to this type of picking and did not have the required experience to competently pick the produce.
It would NOT be a good reason to say that the produce was scarce, or that only minimal fruit was ripe. If this is the case then the rate should have been set much higher.
Interestingly, the Federal Court decision establishes that employees who are not competent (i.e with little experience) should not be considered in the equation. In other words, firstly exclude incompetent employees from your calculations, then look at the remaining competent group to ensure that at least 50% or 60% earned equal to or more than the piece rate target.
Finally, all employees engaged on piece rates must have proper piece rate agreements.
The Federal Court determined that the piece rate set for picking of mushrooms was too low. This decision and method of assessing the piece rate accords with the advice that we regularly give our clients.
The other important issue that the Federal Court addressed was whether Marland Mushrooms QLD Pty Ltd and Troy Marland were responsible for the Contractor’s breach of the Award within the meaning of s.550 of the Fair Work Act.
The Fair Work Ombudsmen alleged that Marland Mushrooms and Troy Marland were both “involved in”, “knowingly concerned in” and “aided or abetted” the contravention of the Award and the Fair Work Act. This was vigorously defended by Marland Mushrooms and Troy Marland.
The Federal Court undertook an excruciating assessment of the knowledge that the Company and Mr Marland had of the amounts paid to the Contractor’s employees. The Court reviewed who attended meetings, when the meetings occurred, what was said and by whom.
Ultimately, the Federal Court found that neither the company nor Mr Marland had knowledge of the Contractor’s contraventions and dismissed the proceedings against them.
The Federal Court has confirmed that there are no signs that this matter will be appealed.
Lessons for Growers
Growers need to ensure that if their piece rate records are examined they will honestly and truthfully show that a significant number of employees are earning 15% or more than the applicable hourly rate.
With respect to their Contractors, this case shows that Growers will be investigated for breaches of the Act and Awards by their Contractors. We recommend that Growers regularly audit their contractors for compliance with minimum hourly rates, payment of payroll tax, payment of WorkCover, Visa checks, payment of superannuation, payment of PAYE tax and GST.
Please contact Michael Waters of MRH Lawyers on firstname.lastname@example.org and 07 41545510 should you require any clarification of this.
This is general information only and not meant to replace detailed advice specific to your business. Should you require detailed advice that you can rely upon please contact MRH Lawyers.