• Recent media attention on the underpayment of employees by some of Australia’s well known brands has increased calls for reform to workplace laws
  • On 19 September 2019, the Federal Government released a white paper on proposed amendments to the current framework
  • Possible changes including further increases to civil penalties under the Fair Work Act 2009 and the implementation of criminal sanctions of up to 10 years jail are being considered
  • A number of states including Queensland and Victoria have commissioned inquiries into the issue of wage theft, with the intention of introducing fines and jail terms
  • Given this climate, it is critical that employers proactively audit their workplace arrangements to identify and address any hot spots before ‘brand damaging’ claims arise.

Media reports of ‘wage theft’ by household Australian names have put into sharp focus the issue of wage compliance and the adequacy of penalties for contravening workplace laws.

While the deliberate underpayment of wages is generally confined to a small number of employers operating in lower-skilled industries, the complex nature of Australia’s workplace relations legislation means that employers seeking to do the right thing by their employees can inadvertently breach obligations.

This is highlighted by recent cases involving payroll or other administrative errors, which have resulted in underpayments of multiple millions for issues such as failing to pay annual leave loading and allowances, not rostering employees for minimum shift times under the applicable modern award and applying incorrect rates of pay under an enterprise agreement. This been labelled by stakeholders including unions as ‘organised wage theft’, namely the systematic underpayment of employees in the interests of profit.

The Fair Work Ombudsman, Australia’s national workplace relations watchdog, has been proactive in prosecuting underpayments in recent years, and has been particularly focused on individuals under the accessorial liability provisions of the Fair Work Act.

Several high-profile cases, in the hospitality industry in particular, have escalated calls for reform, and on 19 September 2019, Christian Porter (Minister for Industrial Relations and Attorney-General) released a white paper seeking submissions on the adequacy of the existing penalty framework in the Fair Work Act and potential criminal sanctions for the most serious forms of exploitative workplace conduct.

The paper touches on the recent Protecting Vulnerable Workers reforms, including the increase in penalties for ‘serious contraventions’ to $630,000 for companies and $126,000 for individuals.

Importantly, the Federal Government has sought input from stakeholders on reforms including:

  • 10 year jail terms and/or $1.05 million fines for individuals;
  • $25 million fines for companies;

which are proportionate with penalties for comparable offences such as the Fair Work Act’s ‘corrupting benefits’ provisions.

Mr Porter has indicated that the new criminal penalties will apply only to the most serious types of offending, where there is clear evidence of persistent or repeat offending, or offending on a ‘significant scale’.

While public submissions closed on 25 October 2019, work on a proposed wage theft bill has already commenced.

If a wage theft bill containing such a punitive framework is enacted, it will be a cause of considerable concern for employers affected by forthcoming changes to annualised wage arrangements. These changes, made through amendments to a number of modern awards, are due to take effect on 1 March 2020. Affected employers will need to navigate the new annualised wage landscape, in conjunction with a punitive new framework for ‘wage theft’.