How Federal and State Governments are getting tougher on wage theft.

Wage theft can refer to the deliberate withholding of money owing to workers or an inadvertent failure to honour workers’ entitlements. Either way, businesses and individuals are up for serious penalties – or even jail time – for underpaying employees.

The term “wage theft” has become an increasingly common phrase used throughout media, political and legal settings.

High profile examples that have spurred national debate have involved a diverse range of organisations including 7-Eleven, Melbourne University, a celebrity chef’s restaurants and even the Reserve Bank of Australia.
A recent analysis of Fair Work Ombudsman audits estimated that Australian workers lose approximately $850 million per year due to wage theft orunderpayment of wages.

What is wage theft?

The term wage theft is used to refer to a broad range of different contraventions of workplace laws, most commonly the Fair Work Act 2009 (Cth) (FW Act).

In many instances wage theft concerns a blatant underpayment of wages. For example, an employer pays a worker $10 per hour when an industrial instrument requires that the minimum wage for that worker is $24 per hour.

In other scenarios, wage theft will refer to a broader set of contraventions. For example, a failure to pay workers penalty rates or shift allowances for working weekends or other hours outside of their regular roster. The University of Melbourne, for instance, conceded, among several contraventions, that it failed to pay casual staff for weekend work and overtime, totalling more than $22 million.

Wage theft can also refer to a failure to pay other entitlements owed under an Award or Enterprise Agreement, such as rest breaks, higher duties allowances or allowances for meals, travel and special clothing.

These instances will usually be captured by s 45 of the FW Act (contraventions of an Award) or s 50 (contraventions of an Enterprise Agreement). Other relevant provisions of the FW Act include s 44 (non-compliance with the National Employment Standards) and s 323 (non-compliance with method and frequency of payment obligations).

While the contraventions listed above will generally be captured by the FW Act, it should be noted that the concept of “wage theft” also extends to a failure to make payments owed under other state and federal legislation including superannuation and long service leave obligations.

A recent high-profile example is the Victorian Wage Inspectorate filing charges against Woolworths for failing to correctly pay over 1,000 employees their entitlements under the Victorian Long Service Leave Act 2018 (VIC).

Jurisdiction

Australia's national workplace relations system, or the Fair Work system, covers the majority of private sector employees and employers in Australia.

While these employees and employers are predominantly regulated by the federal FW Act, underpayment matters, including both money claims and pecuniary penalty claims, can usually be initiated in either federal or state courts.

Accordingly, applicants often have the choice to initiate proceedings in either the Federal Court of Australia (FCA), the Federal Circuit and Family Court of Australia (FCFCOA), or an eligible State or Territory Court.

In South Australia, the eligible State Court vested with jurisdiction is the South Australian Employment Tribunal (constituted as the South Australian Employment Court) (SAET).

Underpayment claims up to $100,000 arising under the federal FW Act can be initiated as a small claim in the Fair Work Division of the FCFCOA. The monetary cap for small claims was increased from $20,000 to $100,000 under the recently enacted Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth). These changes commenced on 1 July 2023.

Important considerations for applicants seeking to commence small claims proceedings in the FCFCOA include the fact that pecuniary penalties will not be available for relief, parties need to obtain leave to be represented, and there is a requirement to pay a filing fee. Currently, there is no filing fee for initiating underpayment proceedings in the SAET.

There is the option to initiate a general application in the Fair Work Division of the FCFCOA or the FCA, or to proceed in the SAET. The FCFCOA and FCA have concurrent jurisdiction. It should be noted that claims in the FCA are typically large and complex matters.

Both state and federal jurisdictions impose a six-year time limitation in which to initiate a claim (per s 545(5) of the federal FW Act). It should also be noted that state public sector and local government employees in South Australia will fall outside the national workplace relations system.

Pecuniary penalties

The FW Act imposes various obligations characterised as “civil remedy provisions”, which provide for pecuniary penalties. These penalties effectively operate like a fine and are intended to serve as an enforcement and deterrence mechanism.

Part 4-1 of the FW Act sets out the procedures for enforcing civil remedy provisions.
Section 539 of the FW Act helpfully contains a table which sets out all of the civil remedy provisions available under the FW Act, the persons who have standing to initiate proceedings, the courts in which proceedings may be initiated, and the maximum penalties.

Currently, a court may order a penalty of up to $18,780 per contravention for an individual and $93,900 per contravention for a body corporate. In the case of a 'serious contravention' (per ss 557A and 557B of the FW Act), a court may order a penalty of up to $187,800 per contravention for an individual and $939,000 per contravention for a body corporate.

Under s 546 of the FW Act, the court may order that the pecuniary penalties be paid to the Commonwealth, a particular organisation (such as a union), or a particular person (for example the employee subject to the wage theft).

Legislative reform

In response to the growing prevalence of wage theft, the current Federal Government is introducing further amendments to the FW Act under the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023, which proposes to criminalise wage theft.

In its current form, the proposed s 327A makes “failing to pay certain amounts as required” a criminal offence. It sets out that an employer commits an offence if they are required to pay an amount to an employee under the FW Act, a fair work instrument, or a transitional instrument and they engage in conduct that “results in a failure to pay the required amount to the employee in full on or before the day when the required amount is due for payment”. The failure to pay cannot be in relation to a superannuation contribution, or an amount referable to the employee taking long service leave, or other types of paid leave specified in proposed s 327A(2)(b).

Under the proposed amendments, individuals may face up to 10 years’ imprisonment for committing wage theft. Both individuals and corporations may receive a monetary penalty, which would be the greater amount between (a) 3 times the underpayment amount and (b) 5,000 penalty units (currently $1.565 million) for an individual or 25,000 penalty units ($7.825 million) for a body corporate.

In recent years, State governments in Victoria and Queensland have a taken steps to criminalise wage theft with the Wage Theft Act 2020 (VIC) and amendments to the Criminal Code Act 1899 (QLD), respectively. The current South Australian Labor Government committed to an election policy to introduce criminal offences for wage theft although it has not yet introduced a bill to State Parliament.

We're here to help you

If you believe you've experienced wage theft based on the information provided, the next step is to seek professional legal advice. We're here to help offering a free initial consultation with our employment lawyers in Adelaide, Salisbury, Murray Bridge, Port Augusta, Whyalla, Roxby Downs and Clare.

When it comes to employment law, experience matters. If you’d like advice or direction from an experienced lawyer about pursuing a wage theft claim, please contact Lawrence Ben on (08) 8231 1110, or send us a message.

This article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.