OPINION: Criminalising wage theft in Australia

By: Maurice Baroni and Nick Leon

The transport industry can expect more scrutiny on the issue

OPINION: Criminalising wage theft in Australia
Maurice Baroni


Following a series of well publicised cases of workers being underpaid across a number of industries the Transport Workers’ Union (TWU) is calling for the criminalisation of systematic underpayment and non-payment of superannuation by employers.

The TWU has long claimed that there is widespread non-compliance with award obligations amongst contractors and sub-contractors although this latest call extends beyond the transport industry.

This campaign has gained some traction in industrial circles including from the NSW Shadow Minister for Industrial Relations the Hon. Adam Searle, MLC.

TWU Position

TWU national secretary Tony Sheldon has urged the Labor Party to amend the Fair Work Act2009 (Cth) to make ‘wage theft’ a criminal offence.

In his May 16, 2017 opening address to TWU’s national council, Sheldon detailed the increasingly widespread use of wage and superannuation theft as a business model.

Citing this "new crime spree" gripping Australia, Sheldon called on Labor to hold "thieving bosses" accountable, and treat deliberate underpayments "like any other form of theft".

Sheldon criticised the current regulations for promoting underpayment, asserting that employers view the current framework as "an incentive to see what you can get away with".

In Sheldon’s view, following a complaint and investigation into alleged underpayments, employers and the Fair Work Ombudsman are likely to reach settlement to merely repay wages with little other consequence.

Sheldon called out the system describing it as a system where if "worst comes to worst" employers will "simply be asked to pay back what [they] owe to those who complain and pocket the rest".

The TWU will be seeking support at Labor Party conferences around the country, calling for employers engaged in "wage theft" to be subject to criminal prosecution and potential jail terms.

The TWU argue that the proposed changes to the Fair Work Act will operate as an incentive for employers to comply with award payments by holding those caught underpaying employees liable to criminal convictions.

NSW Labor

On May 19 in a speech given to the NSW Industrial Relations Society, Adam Searle criticised the culture of systematic underpayment in Australian workplaces.

Drawing particularly on wage theft in franchises, Searle called for the implementation of "sweeping measures" to deter "wage theft" which is deliberate and widespread.

In making the case, Searle referred to claims of underpayment and wage fraud exposed in leading Australian household brands, including 7-Eleven, Pizza Hut, Domino’s Pizza, Caltex, United Petroleum and Baker’s Delight to demonstrate the national epidemic.  

Searle listed the likelihood of people getting caught as "the crucial factor" in achieving award compliance, noting that with the Fair Work Ombudsman (FWO) and the NSW Office of Industrial Relations inadequately resourced, the perceived chance of being caught is low.

Searle has started consulting on state-based "wage theft" legislation in response to the federal system failing to adequately deal with the issue.

In an interview with Workplace Express published on May 23, Searle noted that NSW has a "range of tools at its disposal that are currently not being utilised".

While discussions are taking place regarding the shape a new state based regulatory approach may take, ultimately, "people who break the law need to be much more likely to get caught".

Mr Searle indicated that following a period of consultation, state Labor would announce its policies on wage theft.

Government action

In an attempt to address exploitation of workers, the Turnbull Government have introduced the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 which proposes to significantly increase pecuniary penalties for systematic and intentional "serious contraventions".

The Bill also aims to introduce liability for body corporates and franchisors for serious contraventions, ensuring that those who are part of a systematic and intentional pattern of serious contraventions are held accountable and liable for increased civil penalties.

While the government argues the Bill represents a step in the right direction, critics have questioned how effective the legislation may be in bringing about award compliance.

In his address to the NSW Industrial Relations Society, Searle noted that the Bill "does not improve the situation much".

Joanna Howe, an Associate Professor at the University of Adelaide, has commented that the Bill would do little to eradicate underpayments as employers operate on an assessment of the risk of getting caught – which remained slim.

The Bill is still before the House of Representatives.

Interestingly, Brendan O’Connor, the Federal Opposition’s workplace relations spokesman, has indicated that it will be "wary about criminalising industrial relations matters".  

The way forward

While the TWU’s call to criminalise underpayments has gained some traction, there are seemingly no plans, at least at a federal level, to criminalise underpayment claims.

However, it is now becoming more widely accepted that without a tangible risk of being caught, it is unlikely employers would voluntarily incur the costs associated with aligning their payment practices with award standards. Accordingly, governments will be under pressure to boost funding to adequately resource investigations.

Given the parallels between the use of contractors and sub-contractors in the transport industry and the types of downstream businesses (often franchises) which have been shown to be underpaying workers, the transport industry should expect to be the subject of heightened attention in this area.   

Further, employers may see unions such as the TWU increasingly trying to use right of entry powers to investigate suspected contraventions of the Fair Work Act.

Maurice Baroni is a Principal and Nick Leon an Associate at McCabes Lawyers

T: 02 9265 3223   

E: m.baroni@mccabes.com.au

You can also follow our updates by joining our LinkedIn group or liking us on Facebook