Eagers back-pays $16m in underpayments to staff

Eagers back-pays $16m in underpayments to staff

Photo: Sandro Antonietti, via Unsplash.

Australia's largest car dealership group Eagers Automotive (ASX: APE) has back-paid more than $16 million to underpaid staff after detecting anomalies in the payrolls of Automotive Holdings Group (AHG) subsidiaries which it acquired in 2019.

Five subsidiaries have signed an Enforceable Undertaking (EU) with the Fair Work Ombudsman (FWO) to make the payment, including interest and superannuation, to 13,277 current and former staff who mainly worked across the greater areas of Newcastle, Sydney, Brisbane, Melbourne and Perth.

Eagers self-reported the underpayments to the regulator in June 2021 following a review of the companies' payroll after acquisition, finding anomalies across 19 AHG subsidiaries between 2013 and 2021.

The self-report revealed that EAL subsidiaries unlawfully failed to pay in line with award progression; incorrectly classified employees; did not pay overtime, annual leave and annual leave loading; did not pay for training; and failed to pay, as required, when employees were sent home due to no work. 

The companies were also found to have made unauthorised deductions.

Rectifications outside of the requirements of the EU include an additional $1.9 million, including interest and superannuation, back-paid to 701 current and former employees of 14 other subsidiary companies.

Individual back-payments to employees range from less than $1 to $69,298, and the average back-payment is about $1,217 including superannuation and interest.

About $200,000 is still owed to employees who cannot be found – under the EU, payments must be completed within 120 days or be paid into the FWO's unpaid monies fund.

Employees affected by the breaches were engaged full-time, part-time and casually across car and truck dealerships in the network as finance officers, and in car sales, parts sales, and servicing employees.

Under the EU, the five companies must also make a combined $450,000 contrition payment to the Commonwealth’s Consolidated Revenue Fund.

Fair Work Ombudsman Anna Booth says an EU is appropriate as the underpayments concerned largely relate to past non-compliance identified by Eagers following an acquisition of previously separate entities.

The regulator says the companies have cooperated with the FWO’s investigation and demonstrated a strong commitment to both rectifying underpayments and changes to ensure they are not repeated.

"Under the Enforceable Undertaking, the subsidiaries of Eagers Automotive Limited have committed to implementing stringent measures to ensure all their workers are paid correctly. These measures include commissioning, at their own cost, an independent auditor to check they are appropriately meeting all lawful entitlements," Booth says.

Booth says the matter serves as a warning to all employers about what is at stake if they fail to ensure rigorous compliance with awards and enterprise agreements.

“In this matter, long-term breaches resulted from a lack of a consistent time and attendance system along with reliance upon manual paper timesheets, and a decentralised payroll system – plus a lack of awareness of workers’ legal entitlements,” Booth says.

“The companies’ disappointing, unchecked breaches left them significant staff underpayments and related rectification costs."

She adds that it is pleasing to see pleasing that EAL proactively looked for issues in its new acquisitions, and then self-reported to the FWO and endeavoured to rectify the issues.

"Large employers need to place a higher priority on having systems and processes in place that ensure employees’ full lawful entitlements are met, year-in, year-out," she says.

"It is also a good example of the importance of conducting thorough compliance checks when acquiring businesses, and implementing centralised, consistent compliance processes to avoid ongoing issues."

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