CBA fined record-high $10.3 million for underpaying employees

The Commonwealth Bank of Australia (CBA) and its subsidiary have been fined with a combined $10.3 million after it underpaid a total of $16.07 million to over 7,402 employees 2015 to 2021.

The Federal Court imposed a $7.31-million penalty against CBA, while its subsidiary Commonwealth Securities Limited (CommSec) has been ordered to pay $3.03 million.

The penalties were due to CBA and CommSec's failure to properly implement its Enterprise Agreements and Individual Flexibility Arrangements (IFAs), which left thousands of employees underpaid for years.

The CBA also breached workplace laws by misrepresenting to some employees that they were better off under the IFAs.

The bank previously admitted to its workplace breaches, including the underpayments, in a Statement of Agreed Facts and Admissions last year.

Underpayments ‘will not be tolerated’

In imposing the penalties, Federal Court Justice Robert Bromwich said CBA and CommSec were "amply able to prevent anything of this nature occurring in the first place, let alone over such a substantial period of time."

"The simple fact is that the obligations were readily able to be complied with, and proper checks to ensure that was taking place were not hard to implement," Bromwich said in the decision.

"That did not happen, and the message needs to be loud and clear that this is not good enough and will not be tolerated, most significantly for other would-be contraveners, but also as an ongoing warning for CBA and therefore the CBA Group of which it is the dominant member."

Record-high penalties ‘extremely disappointing’

The penalties imposed against CBA and CommSec were reduced to reflect their admission, cooperation, and execution of a remediation programme that involved back paying employees.

Despite this, the Fair Work Ombudsman said the penalties were still the highest ever it secured in legal action.

"It is extremely disappointing that companies with such extensively resourced internal human resources and legal functions could have such a poor approach to ensuring they paid their staff their basic lawful entitlements," said Fair Work Ombodsman Anna Booth in a statement.

"The case highlights that having a poor corporate culture towards compliance can result in serious consequences, including facing enforcement action and suffering reputational damage."

According to Booth, the FWO has been reminding large corporate employers to prioritise their systems and processes in place to ensure employees are paid their full entitlements.

"Employers cannot put in place systems that prioritise their financial or competitive advantage without also putting in place strong governance to ensure that those systems meet minimum entitlements," Booth said.

Bromwich added that the penalties against CBA and CommSec should dissuade other would-be contraveners, stressing that it is "not worth the candle to have inadequate compliance systems in place."

"What needs to be deterred is a system being left in place that allows for basic errors to be made without an adequate system of checking or detection and thereby correction," Bromwich said.