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Crackdown on Underpayment of Wages

Piggy BankFederal Parliament is foreshadowing strong new penalties for employers who underpay their workers, including the introduction of criminal penalties.

Recent Cases

Underpayment has hit the headlines recently as George Calombaris has been ordered to pay a fine of $200,000 for the underpayment of $7.8 million. The penalty of $200,000 has been labelled as inadequate by many, including the Industrial Relations Minister and Attorney-General, Christian Porter. Porter has said they will review penalties and is open to criminal penalties reserved for repeat breaches.

Other recent cases have seen substantial penalties, especially if the exploitation of migrant workers is involved. This mirrors the recommendations of the Migrant Workers’ Taskforce set up by the Government in response to the underpayments of 7-Eleven employees first uncovered in 2014. The Taskforce also called for harsher penalties including criminal penalties in the case of ‘serious forms of exploitative conduct, such as where that conduct is clear, deliberate and system’.

Courts are also beginning to crack down on a failure to keep proper books and records. A Victorian Fruit and Vegetable retailer was recently fined $243,000 for underpaying workers, non-compliant record keeping and falsifying employment records. The underpayments included ‘off the books’ and ‘on the books’ payments, and flat rates not in accordance with Awards. This emphasises the importance of being aware of your obligations as an employer and the need to pay employees accordingly.

Even with these recent significant fines, the call for harsher penalties is growing, and is now ringing throughout parliament as well is in unions, and taskforces.

Potential New Penalties

Prime Minister, Scott Morrison, announced on 24 July 2019 that the Attorney-General is drafting laws to deal with criminalising worker exploitation. The exact details of such laws are not yet clear.

The Victorian Trades Hall Council have argued for a maximum penalty of 10 years in prison for employers. The Migrant Worker Taskforce called for monetary penalties as high as $10 Million or 10% of annual turnover. It is unlikely that criminal penalties will extend to the unintentional underpayment of wages and will be reserved for ‘sustained, substantial and intentional cases.’ It is likely that penalties on employers for underpayments will be harsher with an intention to send a message that breaches will not be taken lightly.

New legislation is expected to be tabled in the coming months and is likely to receive partisan support for harsh penalties, including criminalising underpayment of wages.

How to Protect Yourself

With the possible introduction of hefty penalties, employers cannot afford to underpay employees. The Fair Work Ombudsman has made it clear that even inadvertent underpayments will be punished. To ensure that workers are paid the wages that they are entitled to employers need to be aware of relevant Awards and provide clear descriptions of employees’ positions.

Employers who may have already underpaid their employees should not panic. There are steps that can be taken to fix an underpayment, however, action need to be taken promptly. An Employer that is worried about having underpaid employees needs to work out how much the employee should have been paid, backpay the amount owed, and stay up to date with future wage increases.

It is important as employers to stay on top of changing legislation and ensure that you are compliant with all requirements, and aware of changes to employment law.

If you have any questions or would like to discuss this further or would like assistance with an assessment of our award obligations or employee role descriptions, please contact Adren Choon or Mitchell Wilkinson of Lewis Holdway Lawyers on (03) 9629 9629 or adrenc@lewisholdway.com.au or mitchw@lewisholdway.com.au.