Strong deterrent needed: Underpaying director who lacked contrition hit with a $35k fine

In what the Fair Work Ombudsman deemed a deliberate and “blatant flouting of workplace laws”, a director has been handed a nearly $36,000 penalty and ordered to personally repay nearly $150,000 in deliberate underpayments to his former employees.

After deliberately underpaying 16 of his staff a total of $148,812 between October 2021 and December 2022, D365.Group sole director David Mark Blumentals has been ordered to personally repay the workers, after the Federal Circuit and Family Court imposed a penalty of $35,308 for the underpayments.

Before placing the company into liquidation in 2023, Blumentals did not pay the 16 workers their accrued annual leave entitlements at the end of their employment, and 12 were not paid their wages in full for the final weeks of work that they performed, with one being underpaid payment-in-lieu-of-notice-of-termination entitlements.

Blumentals directly managed the company’s “day-to-day operations, including being responsible for human resources and payroll functions”.

The Ombudsman found that Blumentals failed to comply with his obligations under the Fair Work Act and the National Employment Standards through these individual underpayments, which ranged from $4,581 to $23,749.

In her decision, Federal Circuit and Family Court Judge Gillian Eldershaw found that Blumental’s underpayments were deliberate, as he “displayed no contrition or effort to rectify the underpayments across the [years], instead making baseless claims of dishonest dealings and wrongdoing against the affected workers”.

Previously, in a 2019 court ruling, Blumentals was found to have underpaid a worker $9,604 worth of the same entitlements.

“If [Blumentals] pays such little heed to his obligations relating to past employees, there is no reason to think that he would comply with his obligations to the current employees unless he is strongly deterred from such conduct,” Judge Eldershaw said.

Ombudsman Anna Booth said that business operators need to be aware that they can be pursued in court for penalties and compensation orders even after the company has been wound up.

“The conduct in this case is a blatant flouting of workplace laws, and the penalty and back-pay orders imposed send a clear message about the consequences for such breaches,” Booth said.

The judge noted that these contraventions have led to Blumentals enjoying “a commercial advantage relative to other employers in the same industry”.

“I agree that the penalty must be set at a level that sends a clear message to the public that such conduct will not be tolerated,” the judge said.

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Carlos Tse

Carlos Tse is a graduate journalist writing for Accountants Daily, HR Leader, Lawyers Weekly.