IT company director ordered to rectify almost $150,000 in staff underpayments

The Fair Work Ombudsman has secured a $35,308 penalty and a personal compensation order of almost $150,000 against David Mark Blumentals for his involvement in his company allegedly deliberately underpaying 16 workers.

The Federal Circuit and Family Court has imposed the penalty against Blumentals, who was the sole director and shareholder of D365.Group Pty Ltd, which he placed into liquidation in 2023.

The penalty was imposed in response to his involvement in D365.Group allegedly underpaying 16 workers a total of $148,812 between October 2021 and December 2022.

Individual underpayments range from $4,581 to $23,749, the Ombudsman claims.

In addition to the penalty, the court has ordered Blumentals to personally make compensation payments to rectify the underpayments in full, plus interest.

The underpaid workers were IT consultants who were based in Sydney, Melbourne and Brisbane. Seven were visa holders.

The Ombudsman stated that Blumentals directly managed D365.Group’s day-to-day operations, including being responsible for human resources and payroll functions.

D365.Group was in the business of modifying, selling, deploying and providing services to clients in relation to Microsoft enterprise software products, including Dynamics 365 and Power BI.

The Ombudsman alleges that all 16 workers were not paid 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 they performed. One was also underpaid payment-in-lieu-of-notice-of-termination entitlements, the Ombudsman claims.

The entitlements were owed under the Fair Work Act, including entitlements under the National Employment Standards.

"Employees were never underpaid"

When contacted for comment by techpartner.news, Blumentals reiterated his former statement given to this publication last year when the legal action was first announced.

"The time period is principally 2020-2021. Due to COVID, several hires were made via Teams Meetings without the standard in-person interviews or reference checks," he said.

"Sadly, this practice resulted in what can only be called “phony” hires as applicants “fluffed” their resumes to get a job in difficult times. These fakes were identified quickly with employment terminated.

"All our employees were working from home. To ensure viability, we required all employees to ensure work activities were recorded as time entries linked to customer and project accounts in our ERP software.  Of course, we continued to pay according to contracted 38 hour or 40 hour work weeks. 

"Unfortunately again, some employees “gamed” the system either submitting fake time entries, partial entries or nothing at all – many coming to light only during audit at time of offboarding.

"I can assure you that in all cases employees were never underpaid, if anything they were overpaid! (paid hours far exceeding worked hours). Also worth noting is the significant investment made in every employee – tens of thousands of dollars spent on training, examination and certification.

"Throughout 2020-21, every employee received their pay fortnightly by EFT, without fail. This was regardless of whether they were on sick leave, taking leave for COVID vaccinations and recovery or annual holiday leave.

"We value our team highly and are proud of the fact that many have worked together now for 5 years or more – supporting our customers, doing great work both in Australia and internationally."

Previous court ruling for underpayment

Fair Work Ombudsman Anna Booth said business operators need to be aware that they can be pursued in court for penalties and compensation orders, even in circumstances where their company has been wound up.

“There is a strong public interest in us taking enforcement action to ensure individuals, while not the legal employer, are held to account for their involvement in significant, deliberate employee underpayments,” Booth said.

“Whether against directors, owners or any other individual accessory, we will continue to take court actions to protect workers and deter this type of unacceptable conduct.

“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."

The Ombudsman stated that Blumentals was involved in underpaying the 16 workers’ annual leave and wage entitlements despite a 2019 court ruling that a company he controlled had underpaid a worker $9,604 as a result of underpayment of the same entitlements.

The Ombudsman also stated that Judge Gillian Eldershaw found that Blumentals’ non-compliance in the current matter "was deliberate, and that he had displayed no contrition or effort to rectify the underpayments across the years since, instead making baseless claims of dishonest dealings and wrongdoing against the affected workers".

“[Mr Blumentals], as the sole director of the Company when the 2019 Orders were made, knew that his conduct which is the subject of the current proceedings contravened the [Fair Work] Act,” Judge Eldershaw said.

Judge Eldershaw also found there was a need to deter Blumentals from underpaying workers he had engaged through new companies he had established.

“If [Mr 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.

Judge Eldershaw also noted the contraventions had resulted in Mr Blumentals enjoying “a commercial advantage relative to other employers in the same industry”.

“This has served as a de facto punishment to those employers who have complied with their obligations. 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.”

At the end of last month, the Fair Work Ombudsman announced it has taken legal action against the former operator of Melbourne-based Geek Central Australia over unpaid wages and entitlements to a part-time staffer employed by the business between 2015-2023.

Last year, the Fair Work Ombudsman also secured the maximum available penalty in court - $41,250 - against Perth company My IT Partner Pty Ltd, for failing to comply with a compliance notice requiring it calculate and back-pay a full-time helpdesk worker’s entitlements.