Union softens hard line on 'wage theft'

Businesses that immediately rectify cases of underpayment may soon be protected from the additional burden of civil penalties, according to a new industrial relations agreement.

The deal marks a consensus between labour groups under the Australian Council of Trade Unions (ACTU) and employer groups on how best to proceed with back-payments in cases where businesses mistakenly underpay staff.

ACTU secretary Sally McManus said they had reached a “95% agreement” over a quicker system for repayment that enables employers to evade civil penalties once they begin cooperating with the Fair Work Commission in rectifying their errors.

Read more: Over one million Australian employees exposed to ‘wage theft’

“We were prepared to agree to that – it works for workers, who want to see their money back faster,” McManus said in a report on The Guardian. However, employers who were “always going to do the wrong thing at the extremes” would still be made to face the full force of the law, she said.

The development this week signals a change in the hard stance union leaders have taken on the matter. Unions have long called for a massive crackdown against underpayment, viewing payment lapses largely as wage theft.

“In some sections of the workforce, underpayment of wages has become routine,” ACTU said in a 2018 report. “Penalties for employers found to have knowingly or intentionally underpaid their staff should be significantly increased.”

The ‘inadvertent’ loophole
Federal Attorney-General and Industrial Relations Minister Christian Porter has been working to introduce legislation that criminalises the worst offenders. At the same time, he wants to boost “civil compliance” and strengthen measures under the Fair Work Act 2009 which specifically address offenses that “do not meet the threshold of criminal conduct,” he said.

Read more: Businesses in Victoria will face criminal sanctions for ‘wage theft’

Labour law professor John Howe of the University of Melbourne said the question remains over how regulators would determine which offenders “inadvertently” underpaid workers and which ones are deliberately cheating workers out of their wages.

“There are obviously a lot of businesses where there is an inadvertent error but we know there are also a lot of employers where wage theft is part of their business model,” Professor Howe told The Australian Financial Review.

“What are you going to put in place so those businesses don’t leverage the ‘inadvertent’ loophole?”

Tess Hardy, a senior lecturer in law, also from the University of Melbourne, believes “harsher civil or criminal penalties will not, on their own, lead to greater compliance”.

Hardy, who has worked with Howe in examining cases of employer non-compliance, said: “It is the perceived risk of detection, not the severity of the sanction, that is most likely to enhance deterrence and encourage compliance” regarding issues of underpayment.