Information current at date of publication: 26 June 2020.
The average reading time for this Alert is 6 minutes.
Wage Theft
Underpayments have become a significant issue in the Australian workforce, with large underpayments reported in recent months by the Made Group, Woolworths, Coles and Qantas. Last week the ABC signed an enforceable undertaking including a $600,000 contrition payment, over and above the underpayment of wages.What have previously been characterised as inadvertent underpayments flowing from a misunderstanding of relevant awards, are now being characterised, in some circumstances, as deliberate wage theft.
Wage theft includes circumstances where employers dishonestly withhold wages, superannuation or other entitlements from employees. Wage theft also includes falsifying or failing to keep certain employee records, with the intention of dishonestly obtaining a financial advantage.
To combat wage theft, the Victorian government has passed the Wage Theft Act 2020. The Act creates criminal offences relating to the theft of employee entitlements, failure to keep or falsification of records, and establishes the Wage Inspectorate Victoria. The Act will apply to both corporate bodies and individual employers.
It has not yet been confirmed when the Act will come into effect, but it will be no later than 1 July 2021.
The Act
Under section 6 of the Act, an employer, or an officer of the employer, must not dishonestly withhold wages or entitlements owed to an employee. Withholding includes any direction or authorisation given to another person to withhold entitlements, where the direction or authorisation is given by the employer, an officer of the employer or a board of directors. The offence does not extend to employees who are not officers of the employer.
Offences of permitting or authorising the withholding of employee entitlements may be proven where it can be established that a “corporate culture” existed within the employer’s business that encouraged or tolerated the behaviour that led to underpayments.
The Act also creates offences relating to falsification of records relating to employee entitlements, and failure to keep records relating to employee entitlements, if the employer that committed the offence intended to dishonestly obtain a financial advantage or prevent the exposure of a financial advantage already gained by the employer (or another person).
It will not be a defence for an employer to argue that the affected employee consented (knowingly or unknowingly) to the withholding of entitlements. For example, an employer will not be able to rely on agreement by an employee to be paid a flat rate of $20 per hour, if their relevant modern award actually entitles them to $22 per hour.
For the purposes of each of the offences, dishonesty is defined as dishonesty according to the standards of a reasonable person. Accordingly, we would not expect this to apply to an underpayment arising from a genuine oversight, or a misunderstanding of an award.
The Act does not change the existing requirements that employees must be paid in accordance with employment contracts, awards and enterprise agreements.
Penalties
The maximum penalty for companies who withhold wages of entitlements, falsify or fail to keep records is a fine of 6000 penalty units, or $991,320. For individuals, including individual employers and company officers, the maximum penalty is 10 years imprisonment.
A body corporate may be liable for any offences committed by its officers, unless it can demonstrate that it exercised due diligence to prevent such conduct from occurring. Similarly, if a body corporate commits an offence under the Act, an officer of the body corporate is taken to have also committed the offence and may be separately prosecuted unless the officer can prove that they exercised due diligence to prevent the offence.
The Act creates additional penalties for employers that are separate to penalties that may arise as a result of breaches of the Fair Work Act 2009 (Cth). The Commonwealth government has flagged its intention to create federal wage theft laws, which may create a constitutional or legislative inconsistency. At this stage, there is no confirmation as to if or when the Commonwealth government will advance its own legislation.
Fair Work Commission Annual Wage Review
As part of its annual review of the National Minimum Wage, the Fair Work Commission has announced that the National Minimum Wage will be increased by 1.75%. The increase applies to all modern awards, however the date on which the increase will apply varies across the modern awards between 1 July 2020, 1 November 2020 and 1 February 2021.
A copy of the full decision is available here. A list of the awards and the date their changes come into effect can be found here.
Where employees are not covered by an award or enterprise agreement, the new national minimum wage from 1 July 2020 will be $753.80 per week, or $19.84 per hour.
How we can help
Please contact Russell Kennedy's Workplace Relations, Employment and Safety team for advice regarding the Wage Theft Act 2020, the Fair Work Commission Annual Wage Review or any other workplace relations matter.
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