Business named and shamed by Fair Work Ombudsman gets reduction in penalties: Case upheld by Federal Court

The Federal Court has upheld an earlier ruling that “misleading” press releases issued by the Fair Work Ombudsman should reduce the penalty given to a business found to be underpaying one of their workers.

In a ruling issued late last year, Justice Berna Collier upheld a Federal Circuit Court ruling that two media releases issued by the regulator in 2012 about a Brisbane beauty and photography business, New Image Beauty Salons, were misleading because, to a layperson, the word “prosecution” could be taken to read the business was facing criminal prosecution, which it was not.

An earlier finding that the press releases were “misleading” helped limit penalties against the business. The Fair Work Ombudsman appealed the ruling on a number of grounds, as did the business in question, which wanted to have its penalties reduced further. The Federal Court rejected both appeals, upholding the original ruling.

Rachel Drew, partner at Tresscox Lawyers, tells SmartCompany the case revolved around the assessment of penalties against employers for underpayment.

“One of the things always taken into account by the courts is the conduct of the employer, how the underpayment came about, whether the employer has rectified the situation, and the effect of the process on the employer.

“In this case, the employer argued that the media releases by the ombudsman created a perception of criminality and that itself was a penalty to the business.”

It’s not the first time employers have argued that the adverse publicity caused by a Fair Work case should be taken into account as part of their penalty. Often, Drew says, businesses can point to negative effects on their business. In this case, however, the judge ruled showing such negative effects was not necessary.

Because of this, the Fair Work Ombudsman is reviewing the words it uses in its press releases.

Drew says the release of such pronouncement is a “very deliberate strategy” on the part of the Ombudsman.

“They do it to publicise what they’re doing and also to educate employers,” she says. “But they’ve taken on board that using a word like ‘prosecution’, that lawyers might understand means civil, might, to a member of the public who’s looking at the website, assume is something more sinister.”

In 2012, Melbourne hairdresser Craig Lane told SmartCompany the Fair Work Ombudsman had “publicly destroyed [his] business” after a press release accusing him of underpaying an apprentice was picked up by four local newspapers and radio stations 3AW, Fox FM and Triple M.

“I was always under the impression that you can’t name someone until you have actually won the case,” Lane said.

“In the local paper that I was named in, on the same page someone robbed a house, someone was a paedophile and they didn’t name the person.”

A spokesman for the Ombudsman defended its decision to publicise its prosecution of Lane, telling SmartCompany it was “usual practice” to issue press releases for prosecution cases.

The spokesman added that it was rare for the Ombudsman to prosecute an employer.

“When making decisions in relation to compliance actions, the Fair Work Ombudsman takes into account explanations of non-compliance and the wider context of a duty-holder’s decision-making,” the spokesperson said.

“The FWO’s aim is for its litigation activities to be transparent, accountable, constructive and effective,” said the spokesperson.

“The FWO generally commences litigation in situations where duty-holders refuse to rectify non-compliance issues voluntarily, or where serious or repeated contraventions are involved.

“The FWO issues media releases in relation to its litigations to support compliance with Commonwealth workplace laws.”