“Boss Better Have My Money!” – Australia’s Wage Theft Phenomenon

Over the last few years, wage theft has continued to step in and out of the spotlight as the issue gains increasingly prevalent within Australia. What’s all the fuss about you ask? Let’s take a look at some statistics to put things in perspective:

• Between March 2018 and August 2022, the total underpayment figure for enforceable undertakings was approximately $185 million.
• In the 2021-2022 financial year, the Fair Work Ombudsman (FWO) recovered $532 million in unpaid wages and entitlements. Approximately $279 million of these total underpayments were recovered solely from large corporate employers.

Curious as to who some of these large-scale corporations are? Let’s take an inventory on just a handful of the numerous Australian businesses who were caught red-handed underpaying their employees:

Melbourne University

Melbourne University was ordered to backpay 15,000 current and former employees a total of $22 million.  In 2022, it was revealed that the University of Melbourne was not fulfilling employees’ full entitlements as outlined in their Enterprise Agreement. This involved the review of over 3.2 million payslips relating to casual employees, over a period of eight years.

Super Retail Group

Super Retail Group, owner of many well-known retail stores including; SuperCheap Auto, Rebel Sport and BCF, was found to have underpaid their employees a total of a whopping $43 million.

Woolworths

‘Breach on a massive scale’: Woolworths has admitted (30 October 2019) that they’ve underpaid thousands of staff by as much as $300 million.

Endota Spa underpaid employees on 457 working visas

The day spa franchise, Endota, was found to be underpaying 13 of its staff by up to $80,000 over a period of 4 years. Each fortnight, employees working at Endota on 457 working visas had $250 of their pay deducted.

Lush Australia owed as much as $2 million

Lush Australia admitted to underpaying around 5,000 employees as much as $2 million dollars. Director of Lush Australia, Peta Granger, said in an interview on Hack, a podcast hosted by Triple J, “our payroll system did not automatically interpret the modern award…We’re human and we’re capable of making mistakes”.

Australian Unity

Unity was ordered to pay a $250,000 ‘contribution payment’ for underpaying their staff over $7.3 million. Australian Unity has been ordered to pay a contribution payment as a result of underpaying over 8,900 employees between 2014 and 2021. Noted as payroll errors, the underpayment occurred in their assisted living business which covers aged care and disability services.

Michael Hill

Michael Hill International has been reported to spend approximately $25 million to compensate employees who were underpaid over a six-year period.

Qantas

Qantas has been in hot water for engaging in wage theft on many occasions over the last few years. Most notably in 2020, the FWO reported that as per a court-enforceable undertaking, Qantas is required to back pay their employees a total of $7.1 million.

Regardless of the industry, underpayment is rife across Australia. This was the driving force for the Albenese Government’s scheme to knuckle down on employers manipulating legislative loopholes and engaging in intentional wage theft of their employees. The Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (Cth) proposes reforms of record-breaking significance. With the threat of jail-time imposed, employers who don’t get with the program, might find themselves receiving some shiny new metal bracelets.

Below we explore some key reforms which should be noted.

Criminalising Wage Theft

The proposed amendments would introduce a new federal criminal offence of ‘wage theft’, with significant maximum penalties of up to 10 years in prison and fines of up to $8 million.  This would apply to amounts owing under the Fair Work Act and Industrial Instruments i.e Modern Awards and Enterprise Agreements. Amounts owing under employment contracts are excluded. Workplace Relations Minister Tony Burke spoke on the proposed amendments stating that threat of prison “will sharpen the minds of the very few people who’ve engaged in this intentionally”.

Intentional Underpayments

Conduct considered guilty under the new offence would need to be engaged in an intentional manner.

Self-Disclosure Protection

The bill also includes a proposed protection which may offer employers a get out of jail card by entering into ‘cooperation agreements’ with the FWO, however this will be at the discretion of the FWO. This would entail the consideration of the extent to which the employer has made a ‘voluntary, frank and complete’ disclosure of the conduct, the employer’s cooperation and the severity of the offence.

Increased Civil Penalties

The proposed amendments would also increase the maximum standard civil penalties by a staggering 5x increase for several contraventions of the Fair Work Act. These maximum penalties would increase to:

• $939,000 for a corporation; and
• $93,900 for an individual

per contravention.

In addition, where the contravention involves an underpayment, the maximum applicable civil penalty would be the greater of five times the otherwise applicable maximum civil penalty or three times the underpayment amount. As such, breaches of enterprise agreements or modern awards that result in underpayments would, potentially, leave an employer liable to pay civil penalties of a sum in the millions.

Expanded Criteria for Serious Contraventions

The proposed laws also amend the existing criteria for determining whether a serious contravention has occurred, which triggers higher maximum penalties (up to $4.695 million for a corporation). Under the proposed new laws, a person will be regarded as having engaged in a serious contravention if they knowingly underpay employees or are reckless as to whether a contravention could occur.

Key Take Aways

Employers should note that while the new offence is set to commence on 1 January 2025, it is possible that the consideration of the employer’s “intention” regarding the unlawful conduct, may be established before they commence and therefore trigger liability for any underpayments that occur prior to this date.

Therefore, employers are advised to exercise extensive due diligence and as a matter of priority, take all possible steps to ensure their payroll operations are compliant.

At Chamberlains Law Firm we can help you to further understand this type of issue and how to solve any complications.

*This article was prepared with the assistance of Isabella Turner*