Australia’s largest car dealership forced to back pay $16m

Eagers Automotive Limited (EAL) has back paid more than $16 million, including interest and superannuation, to staff underpaid by five of its subsidiaries, which have signed an enforceable undertaking (EU) with the Fair Work Ombudsman (FWO).

EAL, previously known as AP Eagers, is an Australian public company that operates multiple automotive dealerships in all Australian states and territories, as well as New Zealand.

EAL oversees and operates dealerships that collectively sell close to all major vehicle brands, such as Toyota, Ford, Mercedes-Benz, Kia, Volkswagen, and Hyundai, among many others.

Back in 2019, AP Eagers acquired Automotive Holdings Group Limited (AHG). AHG was the holding company for 19 businesses.

As a holding company, EAL became Australia’s largest car dealership business, with an annual revenue of $9.85 billion. In a fall from grace, EAL had to self-report numerous instances of underpayments to the regulator back in 2021. The underpaid employees mainly worked across the greater areas of Newcastle, Sydney, Brisbane, Melbourne, and Perth.

The self-report came after there was an initiated review of the company’s payroll after the acquisition. Through this review, anomalies were discovered in relation to 19 AHG subsidiaries.

It was revealed through the self-report 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.
• Failed to pay, as required, when employees were sent home due to no work.
• Also made unauthorised deductions.

From this, Eagers Automotive Limited, on behalf of the five entities, had to back pay 13,277 current and former employees of those entities $16.2 million, which includes $12.1 million in wages, $1.1 million in superannuation, and $3 million in interest. These accumulated underpayments occurred from 2013 all the way through to 2021.

The employees who were affected by these disastrous mistakes were engaged in work full-time, part-time, and casually across car and truck dealerships, in the network as finance officers, car sales, parts sales, and servicing employees. Employees right across the board were affected, highlighting how widespread the errors were.

FWO Anna Booth said an EU was appropriate as the underpayments that are the subject of the EU largely relate to past non-compliance identified by EAL following an acquisition of previously separate entities. An EU is also usually applied when the employer is “prepared to voluntarily fix the issue”, which was identified through their cooperation with the FWO’s investigation.

“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 said.

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

The individual back pays, similar to the payment errors, are of a wide range, with some being less than $1, and others totalling $69,298. The average back payment was around $1,217, including superannuation and interest.

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