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Qantas share price under pressure after staff underpayment revelations

The Qantas Airways Limited (ASX: QAN) share price has come under more pressure, closing down 12.64% today after it was revealed that the airliner will be forced to pay back millions of dollars to hundreds of workers, after entering into a court-enforceable undertaking with the Fair Work Ombudsman (FWO). This was revealed to the market in a release by the FWO today.

Details of the Qantas breach

It was revealed today that Qantas had incorrectly paid some of its marketing and administrative staff under the terms of individual contracts of employment, rather than by the appropriate enterprise agreements that applied to its employees.

Qantas actually informed the FWO itself of the error, and this triggered the investigation by the ombudsman.

The FWO pointed out that as a result the market breach, some Qantas employees had failed to receive their required pay in areas including: minimum wages, overtime, annual leave entitlements and superannuation.

The FWO added that Qantas has already paid back over $7 million to over 600 employees who were underpaid between June 2011 and June 2019. These impacted staff were in Qantas’ corporate and administration divisions.

Qantas to apologise and set up complaint hotline

Under the terms of the court-enforceable undertaking, Qantas is required to set up an employee hotline and complaints system within a 30-day period.

In addition, the FWO noted that Qantas has been forced to directly apologise to impacted employees and place public notices on its internal communication systems, and externally on a Facebook page as well as in the national press.

Qantas is also required to rectify any further underpayments it finds by 24 April 2020. The FWO further pointed out that Qantas will be required to make a payment to the Commonwealth’s Consolidated Revenue Fund, which amounts to 5.5% of its underpayments.

Recap of recent announcement

Qantas’ troubles today follow a very tough couple of weeks, with the Qantas share price falling by 57% since 20 February when the current market correction began. On 10 March, Qantas announced further cuts to its international flights reducing capacity by almost a quarter for the next 6 months. These additional changes will bring the total international capacity reduction for Qantas and Jetstar from 5% to 23% compared to the same time last year, with the biggest reductions in the Asia market, which will be down 31%.

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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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