Wage theft a symptom of a complex system

by Kyle Scott

The notion of ‘wage theft’ has attracted plenty of attention over the last couple of years, with a long list of well-known businesses having been engulfed in allegations of wage underpayments and other contraventions of Australia’s workplace laws.

The list of companies caught out includes household name businesses such as 7-Eleven, Caltex, Pizza Hut, Domino’s, the Retail Food Group, Michael Hill Jewellers, Lush Cosmetics, Thales, Jamaica Blue, Muffin Break, and restaurateur George Calombaris, to name just a few.

And the issue has not been confined to businesses motivated primarily by profit. Notably, we’ve seen reputable corporate citizens such as the ABC and charities such as The Red Cross also caught out with their own payroll mistakes.

In response, there have been parliamentary inquiries at a Federal level as well as inquiries by at least two State governments, with one of the key recommendations coming out being the proposed criminalisation of wage theft.

At the present time, Federal Attorney-General Christian Porter is said to be drafting laws to criminalise the ‘serious exploitation of workers’.

Much of the focus has understandably been on ‘naming and shaming’ wrongdoers and looking at deterrence measures. And while the union movement have coined the phrase ‘wage theft’ to characterise the conduct as being of a criminal nature, the reality is that the vast majority of underpayment situations come about from inadvertent errors rather than deliberate non-compliance.

For the most part, these issues are symptomatic of a broader problem with the system.

While there is never any excuse for not paying employees their full legal entitlements, the reality is that our workplace relations system is incredibly complex. Our system of 122 modern awards creates thousands of separate hourly rates of pay, shift loadings, penalty rates, overtime rates and allowances.

This complexity is evidenced by the Fair Work Commission’s review of the award system. Designed as a review of all awards every four years, the current review commenced in 2014 and is still ongoing, almost six years later. The review process has been so resource intensive that, in a rare show of bipartisanship, the Fair Work Act was amended in 2018 to scrap any further reviews.

The award review process has uncovered plenty of examples of ambiguities and errors within the modern awards which, while most have now been rectified, illustrate the complexity of the system. To give one recent example: just last month the Fair Work Commission found that a common clause in modern awards dealing with the span of hours was ambiguous, and was capable of being interpreted in three different ways. This clause has been in a dozen modern awards since 2010.

Those who say the system is not complex are kidding themselves.

And so when even the most sophisticated businesses with dedicated human resources staff and top-notch payroll technologies are making mistakes, what hope do small businesses with no dedicated Human Resources or payroll staff have?

If we want to seriously address the compliance issues within our workplace relations system, naming and shaming employers who have made inadvertent errors or criminalising wage theft is not enough.

The focus needs to be on simplifying the system, educating businesses on their obligations, and supporting businesses to get it right.

Kyle Scott is an Associate Director at Australian Business Lawyers & Advisors in Newcastle. Specialists in employment and workplace law, the firm travel throughout the local area presenting educational events for small and medium sized businesses on compliance obligations.