Lessons to learn from Finberg v Efron [2015] FCCA 2470 – underpaid law student takes employer to court

The exploitation of law students in an increasingly competitive graduate environment is a growing issue. In Finberg v Efron [2015] FCCA 2470, a law student successfully took the law firm he worked at to court for underpayments and other breaches of the Legal Services Award 2010 (LS Award) and the Fair Work Act 2009.

Facts

Saul Finberg was a Melbourne law student who worked at a small law firm Efron and Associates run by a sole practitioner Graeme Efron whilst studying his final year of his Bachelor of Laws and Bachelor of Arts. Finberg worked at Efron and Associates for almost a year from 5 March 2013 to 7 February 2014. Finberg commenced action for underpaid wages, among other things in mid-2014.

What did the law student claim?

Like most law students working in a quasi-legal capacity at a law firm whilst studying, Finberg was covered by the LS Award. See this previous blog post for a summary of the LS Award - http://lawgradinpink.blogspot.com.au/2015/07/law-graduates-and-paralegal-working.html . Finberg claimed the following:

1.       Unpaid wages under clause 14 of the LS Award;

2.       Unpaid superannuation contributions in accordance with clause 23 of the LS Award;

3.       Unpaid annual leave loadings on accrued annual leave in accordance with clause 23 of the Award;

4.       Unpaid accrued annual leave and annual leave loading which was meant to be paid out when the employment terminated.

These four items amounted to a sum of $28,882.83. Interest on this amount was also claimed.

In addition, Finberg also brought action under the Fair Work Act 2009 for breaches of:

1. s.536 – failure to provide payslips with prescribed content and in the prescribed form; and

2. s.535 – failure to maintain employee records in accordance with the Fair Work Act and Regulations.

The employer’s behaviour

Efron and Associates’ initial behaviour was abysmal. The law firm denied the law student was even employed by them and claimed the law student was on a work experience placement. By the time the final hearing occurred, the employer had conceded the law student was an employee and that the LS Award applied.

Consideration by the Federal Circuit Court

1.       Breach of LS Award and Fair Work Act 2009

Judge Jones first considered which classification in Schedule B to the LS Award the law student fell under. The employment relationship had commenced after the law student approached Efron and Associates with a view to gaining experience in a law firm. The law student was given a range of administrative tasks and legal tasks which required legal knowledge and the application of legal skills. The dispute between parties concerned the award classification the law student was employed under, as there was disagreement about the extent of legal tasks performed, and the level of legal skill required.

Judge Jones came to the view that while the law student prepared legal research memoranda and briefs to Counsel, this was limited and involved the exercise of basic legal skills. Any other duties such as attending a property settlement unsupervised, were one off, and still required only basic legal skills. The legal work the law student undertook was of a limited and basic nature.

The employee submitted that his employment was Level 5 – Legal, Clerical and Administrative employee, while the employer asserted Level 2 or Level 3 was the applicable level. Judge Jones decided the appropriate classification was Level 4 – Legal, Clerical and Administrative employee, as the law student’s legal skills best fitted this category, and the employee was able to initiate research and engage in some tasks such as preparing Court books and maintaining files in a reasonably independent way.  Judge Jones then looked at the breaches of the Award:

A.      Minimum pay

Finberg was initially paid $9.62 an hour, until June 2013 when he was paid $10.13 an hour. The current minimum rate of pay under the LS Award for Level 4, Legal, Clerical and Administrative for a part-time employee is $22.32 per hour. This hourly rate would have been slightly less when Finberg was employed at Efron and Associates, but what Finberg received would still have been gross underpayment.

B.      Superannuation

As the employee was grossly underpaid, superannuation contributions were also below the amount required under clause 23 of the LS Award.

C.      Annual leave

Finberg was entitled to be paid out for accrued annual leave under s.90(2) of the Fair Work Act 2009 and the annual leave loading that accrued under clause 35.3 of the Award.  

2.       Breach of s.535 failure to maintain employee records

Section 535 requires an employer to make and keep for 7 years employee records of the kind prescribed in the regulations. Judge Jones was not presented with any probative evidence by the employer that s.535 had been complied with, so made the inference that s.535 had been breached.

3.       Breach of s.536 failure to provide employee pay slips

Finberg was not provided with any payslips until June 2013, which is a clear breach of s.536 which provides “an employer must give a pay slip to each of its employees within one working day of paying an amount to the employee in relation to the performance of work”.

Law student had to pay the employer’s costs for Application in a Case for summary judgment

The costs question related to an Application in a Case heard by the court on 26 August 2014. The Application in a Case was an application for summary judgment under s.17A of the Federal Circuit Court of Australia Act 1999. Section 17A sets a very high bar for summary judgment to be made. The Court must be satisfied that the defendant has no reasonable prospect of successfully defending the proceeding or part of the proceeding. While the section states “no reasonable prospect of success” does not necessarily mean “hopeless” or “bound to fail”, the threshold for obtaining a summary judgment is high. On 26 August 2014 Judge Jones determined that there was not sufficient information to find there were no reasonable prospects of the law firm successfully defending the proceedings, and there was evidence that needed to be ventilated at trial. The law firm then pursued a costs order, under s.570 of the Fair Work Act 2009 which provides a party may be ordered to pay costs only if the court is satisfied that:

(a)    the party instituted the proceedings vexatiously or without reasonable cause; or

(b)   the party’s unreasonable act or omission caused the other party to incur the costs.

The Federal Circuit Court found (b) was satisfied. Key issues were in dispute, such as the classification of the employee, duties performed by the employee, and it could not be said the law firm had no reasonable prospects of success of defending proceedings. The law student had to pay $1,706 in costs for the Application in a Case. The law student was represented, and could potentially commence action in professional negligence against the law firm who advised to file an Application in a Case for summary judgment.

Outcome

The parties were to negotiate consent orders reflecting the breaches found by Judge Jones and the law student was to pay the employer $1,706 for the erroneous Application in a Case.

Lessons to learn

·         Do not assume you are being paid correctly by your employer. If you are working in a clerical or paralegal capacity while studying it is likely you are covered by the LS Award. To calculate rates of pay, you can use the Fair Work Ombudsman’s Pay Calculator http://calculate.fairwork.gov.au/findyouraward.

·         Read the LS Award and understand what your entitlements are. For example, if you are covered by the LS Award and are working a full day, you are entitled to a meal break of between 30 minutes and 60 minutes (clause33).

·         Do not assume that because you are a law student you will be able to successfully manage a case against your employer yourself. The Fair Work Ombudsman can commence litigation on your behalf using their enforcement jurisdiction.

·         Applications for summary judgment are rarely successful and should only be made if certain you will pass the threshold test, as it is likely costs will be awarded against you if your claim is unsuccessful. 

·         In dealing with breaches of s.535, failure to maintain employee records, the Federal Circuit Court used the fact that pay slips were not provided to the employee and the fact the employer provided no evidence to the contrary despite being put on notice to conclude s.535 had been breached. This appears to be a reverse onus of proof on the employer which is not reflected in the wording of s.535.

This blog post does not constitute legal advice. If you believe you are in a situation where you have been underpaid you should seek your own independent legal advice.