Jail time for wage theft: Government moves ahead with plans to criminalise worker exploitation

The federal government will move ahead with plans to criminalise serious worker exploitation within the “next month or so”, as argument rages on about how to deal with Australia’s wage theft crisis.

Prime Minister Scott Morrison yesterday confirmed Industrial Relations Minister Christian Porter is drafting legislation which would criminalise worker exploitation, amid a push for broader reforms to Australia’s workplace laws.

The new laws could introduce the penalty of jail time for business owners who engage in wage theft and will give effect to recommendations made by Allan Fells’ Migrant Worker Taskforce earlier this year.

Porter, who has been fielding pitches from business lobbyists about how to shape Australia’s workplace laws, told the ABC yesterday legislation is expected to be tabled in the “next month or so”.

“Criminalising serious exploitation can be extended to serious, repeat, and substantial instances of underpayment, which would constitute, on anyone’s reasonable judgement, wage theft,” he said.

The Attorney-General earlier this week described the $200,000 fine handed to celebrity chef George Calombaris over the underpayment of his own workers as “light”.

Calombaris has been making headlines all week after losing his high-paying MasterChef gig in the wake of revelations his company, Made Establishment, shortchanged workers to the tune of $7.8 million.

The case was just the latest in a long line of wage theft cases that have come to light in recent years, including companies large and small. The likes of Michael Hill, Super Retail Group, Lush Cosmetics, Domino’s and 7-Eleven have all stolen wages from workers in the last decade.

It was also revealed this morning by AFR that MJ Bale, which employs 300 staff across 57 stores, stole wages over several years.

The company did not reveal the quantum of the wage theft when asked on Friday morning has rectified the underpayments, arguing they were not intentional.

“When we received a query from a retail staff member on wages we reviewed it, worked quickly to rectify it, then proactively reviewed the historical wages of all our full- and part-time staff – including ex-employees,” M.J. Bale founder Matt Jensen said in a statement circulated Friday.

“We are currently working with the Australian Retail Association and many retailers would welcome reform to the retail awards to simplify what is a complex system for everybody.”

“Difficult task”

Council of Small Businesses Australia boss Peter Strong says the proposed wage theft crackdown must be nuanced enough to avoid capturing cases of genuine error.

“Criminal penalties have to be for deliberate wage theft,” Strong says.

Deloitte partner and former fair work ombudsman Natalie James says Porter’s commentary suggests the government is aware of a need for safeguards in the new laws.

“Business would do well to act now to ensure their houses are in order and records are up to scratch, so they can demonstrate to their workforce, the community and the regulator that they are complying with their obligations under workplace laws,” she tells SmartCompany.

Trent Hancock, principal lawyer at McDonald Murholme, says ignorance is an inadequate defence for wage theft, but admits it can be difficult to prove intentional worker exploitation.

“Establishing what’s deliberate and serious is a difficult task,” he tells SmartCompany.

“There are cases where the underpayment of wages is not deliberate and its a challenge we see already in the Fair Work Act in accessorial liability provisions.”

Under current laws, individuals can be penalised separately to the employer responsible for wage theft if a court finds they were involved. The provisions are intended to ensure the law can hold anyone involved in underpayment to account, even if a company has gone into liquidation.

But in practice, particularly in cases where employers have, purposefully or otherwise, not kept adequate records, it can be difficult to prove intentionality against pleas of ignorance.

Wage theft is evidently systemic in Australia, with both business lobbyists, lawyers and unions agreeing current workplace laws require reform. But interest groups don’t agree on how to overhaul the system.

Business advocates have long argued the modern award system, backed by Fair Work Commission determinations, is too complex, leading to businesses making frequent mistakes.

Others have rejected that argument, noting cases where underpayment is built into the cost models of many industries, particularly for fast-food, restaurants and cafes.

Hancock says the problem does seem to be structural.

“It does seem to be a structural issue when we have such a high prevalence of employers underpaying their employees,” he says.

Hancock says its “probably an even split” in his experience between cases where underpayment is intentional versus non-intentional.