Court Issues Stern Warning to Employers on Preventing Underpayments
                     Court Issues Stern 
Warning to 
Employers on 
Preventing 
Underpayments
The Federal Court of Australia (FCA) has imposed 
record penalties of $10.34 million against two related 
entities for multiple violations of the Fair Work Act 
2009 (FW Act), resulting in significant underpayments.
The Fair Work Ombudsman (FWO) initiated legal action 
against the Commonwealth Bank of Australia (CBA) and 
its subsidiary, Commonwealth Securities Limited 
(CommSec), following their voluntary disclosure of 
underpaid entitlements to approximately 7,400 
employees between October 2015 and January 2021.
In the case Fair Work Ombudsman v Commonwealth 
Bank of Australia [2024] FCA 81, the FCA determined 
penalties for the following admitted violations:
The Better Off Overall Test (BOOT)
The enterprise agreements required CBA and CommSec 
to conduct BOOT assessments to ensure employees 
were better off overall. This involved:
– Comparing entitlements under the enterprise 
agreement with those under the relevant modern 
award at the end of each “relevant period” and making 
top-up payments if necessary.
– Comparing individual agreements against the terms 
of the enterprise agreement.
CBA and CommSec failed to perform these 
assessments, leading to approximately $16 million in 
underpayments. Despite being aware since December 
2015 that they were not complying with these 
obligations, both entities failed to implement the 
necessary compliance practices and processes.
This constituted “serious contraventions” under section 
557A of the FW Act, characterized by knowing 
violations that formed part of a systematic pattern of 
conduct over ten years, affecting a large number of 
employees.
Individual Flexibility Arrangement (IFAs) Violations
CBA and CommSec also breached section 50 of the FW 
Act by entering into invalid individual agreements with 
certain employees, resulting in underpayments of 
approximately $5.2 million. These underpayments 
included various allowances, leave entitlements, 
redundancy pay, and overtime.
False or Misleading Representations
CBA violated section 345 of the FW Act by falsely 
assuring employees that they would be better off under 
individual agreements compared to the enterprise 
agreement, which was untrue.
The FCA noted that the contraventions were significant, 
prolonged, and preventable by these large, wealthy 
institutions. The court emphasized that the focus 
should be on the systems, processes, and checks that 
allowed such a situation to persist.
The FCA declared that the penalties must be substantial 
enough to deter not only CBA and CommSec but also 
other potential violators. It stressed the need for 
general deterrence to ensure compliance, highlighting 
the importance of adequate systems to prevent and 
correct errors.
The court ordered penalties of $7.3 million for CBA and 
$3.03 million for CommSec, totaling $10.34 million, to 
be paid within 60 days. A small reduction was applied 
for self-reporting, cooperation with the FWO, and 
admission of liability.
Lessons for Employers
The significant penalties in this case are meant to 
discourage other organizations from maintaining non-
compliant systems under the FW Act or relevant 
modern awards or enterprise agreements. Employers 
must ensure they have robust systems to detect and 
correct errors, including regular HR practices and 
payroll checks. Workplace Law can assist with spot-
checking programs—please contact us for more 
information.
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