Wage theft – it is happening more than you think.
With BHP recently admitting to owing its employees $430 million in underpayments and Coles admitting to owing a further $25 million on top of already owing at least $20 million, wage theft in Australia is truly at a crisis point.
Wage theft includes underpayments stemming from illegal deductions such as refusing to pay overtime or failing to pay superannuation contributions. The Fair Work Act 2009 (Cth) supplies a safety net of minimum conditions under the National Employment Standards. Renumerations rates in contemporary Australia are generally either reflected in occupation-based modern awards or enterprise agreements, which provide for enhanced wages and conditions.
The Fair Work Act provides a civil penalty regime to enforce the safety net of minimum standards in Australian workplace. Contravening minimum wage provisions, such as the NES, a modern award, or an enterprise agreement, attract civil penalties. The principal object of a civil penalty is protective in the sense of promoting public interest in complying with employer obligations. The Federal Court and the Federal Circuit Court are empowered to make ‘any order the court considers appropriate’, such as an injunction, an award of compensation, and a pecuniary penalty order. The maximum pecuniary penalty applicable to an individual for contravening provisions relating to the underpayment of wages is 60 penalty units, or $16,500. This penalty is multiplied five times for a corporation, amounting to a maximum fine of $82,500.
The Fair Work (Protecting Vulnerable Workers) Act 2017 (Cth) increased the maximum pecuniary penalty available for a ‘serious contravention’ of a civil remedy provision to 600 penalty units for an individual, or $165,000. This penalty is again multiplied five times for a corporation, amounting to a maximum fine of $825,000. An employer will have committed a serious contravention if they knowingly breached the provision, and the breach was part of a systemic pattern of non-compliance.
However, the prevalence of wage theft in Australia raises significant concerns regarding the effectiveness of current enforcement provisions in preventing employers from avoiding their obligation to pay minimum wage. In the 2021-22 financial year, the Fair Work Ombudsman recovered over half a billion dollars in underpayments for at least 385,000 employees. The economic recession post-pandemic and increasing insecurity of the Australian labour market is likely to aggravate the pre-existing problems employees experienced with employers avoiding basic employment standards.
A report by the Migrant Workers Taskforce released in 2019 identified the increasing severity and magnitude of underpayments in Australia. Recognising that courts must be empowered with the necessary tools to properly address serious breaches of the Fair Work Act, the Taskforce Report recommended the addition of criminal sanctions to the available suite of penalties. The introduction of criminal sanctions for underpayments of the most serious type, whether relative to the monetary amount, level of knowledge, or recidivist nature, is argued to aid deterrence beyond an increase in civil penalties. The Taskforce Report proposed criminal offences be punished by community service, fines, imprisonment, and the disqualification of at-fault employers from running a business.
The current Labour government made an election promise to implement the recommendations of the Taskforce Report, including the introduction of criminal sanctions for underpayment.
Some states have already acted to criminalise wage theft. Victoria implemented the Wage Theft Act 2020 (Vic), criminalising various offences relating to the underpayment of wages, including the dishonest withholding of employee entitlements and the falsification of employee entitlement records in order to gain a financial advantage. Queensland has also introduced criminal sanctions for wage theft through expanding the parameters of stealing in the Criminal Code Act 1899 (Qld). The amendment makes it a criminal offence to fail to pay an employee the correct rate for performing work.
In April 2023, the Department of Employment and Workplace Relations released a consultation paper on the criminalisation of wage theft at the federal level, recognising that the systemic non-compliance with minimum wage provisions demands ‘stronger deterrence through stronger penalties’.
For example, Bromwich J recently found 85 Coffee Australia liable for intentionally exploiting young Taiwanese students through sham internship arrangements and imposed a pecuniary penalty of $475,200. However, less than four months later, the FWO commenced further proceedings against 85 Degrees Coffee for again underpaying employees. The imposition of a criminal sanction may have been more successful in striking a reasonable balance between ‘oppressive severity and the need for deterrence’.
Legislative amendments to introduce criminal sanctions for wage theft are likely to be proposed towards the end of the year. In the (likely) event the amendments pass, employers need to start being extra careful they are paying workers the correct rate.
The lawyers at Aulich Civil Law have experience advising both employers and employees on their obligations and entitlements in the workplace. If you are unsure about whether you are paying your workers the correct award rate or have an inkling your boss is underpaying you, do not hesitate to contact us at email@example.com