Push for Wage Theft to Be Made a Criminal Offence

A group of Victorian Unions is leading a campaign to make ‘wage theft’ a criminal offence ahead of the upcoming state election.

The Victorian Trades Hall Council and its Young Workers Centre are pushing the government to enact legislation which would prescribe a maximum penalty of 10 years’ imprisonment for the deliberate underpayment of workers.

Extent of the problem

A report by the Fair Work Ombudsman found that nearly half of the restaurants, catering businesses, cafes and fast food outlets surveyed had at least one wage contravention.

Companies identified as the worst offenders included 7-Eleven, Dominos and Caltex – which typically employ younger staff members and migrants.

According to Industry Super Australia, a whopping one-third of eligible workers in Australia are being underpaid their superannuation entitlements. If the organisation’s figures are accurate, it means 2.4 million workers are being underpaid $3.6 billion a year in entitlements.

According to Trades Hall secretary Luke Hilakari: ‘’It’s so rampant, it’s so out of control, it’s time for police to step in… We think this will be a game changer. We will send people to prison over this.’’

Young Workers Centre coordinator, Keelia Fitzpatrick, is of the view that current accountability mechanisms are inadequate and fail to deter corporate misconduct. She cites figures which suggest that in 2014/15, the Fair Work Ombudsman received 14,291 reports of underpayment but only launched proceedings in 42 of those cases.

The Ombudsman is so overwhelmed with complaints that it is unable to properly investigate all of them, leading to calls for further funding to enable the agency to do its job.

Case study

Jordan Waters was employed as a kitchen-hand and waiter for a year at a cafe in Melbourne’s inner-east, earning $16 per hour and receiving no penalty rates.

Mr Waters recently won back more than $8000 from his former employer, with legal assistance from the Young Workers Centre.

”You look at your boss; he’s driving around in an expensive BMW and sending all his kids to private schools and living in a huge mansion,” he remarked. ”The least he could do is pay me properly.”

Jordon’s story is said to be commonplace in service industries, especially for migrant and backpacker workers.

The prevalence of such arrangements, and lack of accountability, has led to calls for deterrence mechanism with real substance.

Fair Work Ombudsman, Natalie James, has told a parliamentary inquiry that many employers flout the law and risk fines because they are not severe enough to act as a deterrent.

“These operators set up their business model on the basis that a successful investigation or a court imposed penalty is simply a calculated risk or the cost of doing business,” she submitted.

“They consider the likelihood of being caught or the quantum of the penalties to be so low, that it is worth exploiting their workforce.”

Criminalisation

The Unions have engaged lawyers to draft amendments to Victoria’s Crimes Act which would, if enacted, criminalise the intentional underpayment of wages.

Ms Fitzpatrick stated that she had received legal advice that such amendments would not be inconsistent with existing federal workplace laws.

Given the extent of the problem, she believes there would be a need for a special police unit to deal with contraventions.

Political inaction

Trades Hall secretary Luke Hilakari said he has been in talks with Victorian Labor over the proposal, and is ”reasonably optimistic’’ that criminalising wage theft will become an election commitment.

”This is what a good government should do; if they say no, we are going to campaign on it.”, he stated.

Victorian Industrial Relations Minister, Natalie Hutchins, says her the party is “looking at the best way to tackle this growing problem”, but declined to commit to criminalising wage theft.

As expected, Australian Chamber of Commerce and Industry chief executive, James Pearson, is against such a proposal. He believes employers already face significant disincentives in the form of investigations, financial penalties and public shaming for engaging in such conduct.

”Nobody wins if employees lose their jobs when a business closes because of the size of the fine or because the employer has been imprisoned,” he stated.

But parliamentary inquiries suggest that financial penalties have not acted as a deterrence, and that large numbers of employers continue to flout workplace because it currently makes economic sense for them to do so.

Federal Labor workplace relations spokesman, Brendan O’Connor, has promises that, if elected, his party would ‘’significantly’’ increase civil penalties for intentional underpayment.

However, no commitment was made to criminalisation at the federal level.

In NSW

NSW Opposition Leader, Luke Foley, has committed to introducing “the heaviest fines in Australia” for wage theft.

“When there is systematic exploitation of workers in the workplace government has a responsibility to intervene,” he told the media, acknowledging that current laws are an insufficient deterrent.

Mr Foley told the state party conference that he would look at enacting a criminal offence for wage theft. He made it clear that any such offence would not apply to mistakes but only deliberate failures, and that systemic breaches could provide evidence of this.

He added that employers who do the right thing will benefit as they won’t be competing with companies that lower overheads by ripping off their staff.

Only time will tell whether a criminal offence of wage theft or other deterrence mechanisms will become a reality.