Employer sent to prison for contempt over underpayments

Employer sent to prison for contempt over underpayments. A North Queensland tour operator has been sentenced to 12 months in prison for failing to back-pay five backpackers, in “unprecedented” contempt of court action brought by the Fair Work Ombudsman (FWO).

It is the first time a court has imposed a jail term as a result of FWO action, the agency said.

On May 10 the Federal Circuit Court (FCC) sentenced Leigh Alan Jorgensen, operator of Cairns company Trek North Tours, to 12 months imprisonment at Lotus Glen Correctional Centre for contravening freezing orders that applied to his company’s accounts.

In 2015 the FWO had brought freezing orders to prevent Jorgensen from dispersing his company’s assets until he had complied with penalty and back-payment orders from legal action over the underpayment of five backpackers from 2013-2014. His company owed the workers $29,000 in unpaid wages and entitlements.

This May, Judge Salvatore Vasta ordered Jorgensen to begin serving his prison sentence “immediately”, but his sentence would be wholly suspended upon payment of an outstanding $84,956 fine.

However, Jorgensen has only spent one day in prison, as he was granted an urgent stay on the orders in the Federal Court on Friday (May 11), and has lodged an appeal against his conviction and sentence.

Company did not obey freezing orders and employer sent to prison for contempt over underpayments

In June 2015 the FCC ordered Jorgensen to pay a $12,000 penalty and his company a $55,000 penalty. Both were ordered to back-pay five migrant workers in full by July 17 of that year.

When the amounts were not paid by the due date, the FWO secured the freezing orders (above). It said it was concerned the employer would divert company assets to avoid paying what was owed.

The FWO said Jorgensen’s communications “suggested he was prepared to bankrupt his company to avoid paying the penalties and back-pay order”. Jorgensen paid the $12,000 penalty after the freezing orders were imposed on him, but his company failed to pay its penalty, and the workers were not back-paid.

Contempt of court proceedings began last year, where the FWO alleged Jorgensen had contravened the freezing order against his company by transferring $41,035 from two frozen accounts into his family trust account.

FCC Judge Vasta found the FWO’s evidence proved beyond reasonable doubt that Jorgensen had committed contempt.

He has been released on bail, pending the outcome of his appeal, and has to surrender his passport, remain in Queensland, and report to police twice a week.

Fair Work Ombudsman Natalie James said the agency would “use every lever” open to it, to ensure “the integrity of the administration of justice and compliance with court orders imposed under the Fair Work Act”.

“This includes taking unprecedented new actions available to us across the legal framework, such as this one,” she said.

Hunter Partners are Accountants, Tax Agents and Financial Planners. We can assist you with all aspect of your accounting, tax and financial planning requirements, call Hunter Partners on (07) 4723-1223.