Businesses found to have severely underpaid workers could face fines in excess of $4 million, according to a plan floated by the federal government as it coordinates its next slate of industrial relations reforms.
The Department of Employment and Workplace Relations (DEWR) on Thursday released four consultation papers, asking business groups and other stakeholders to share their views on the Albanese government’s legislative reform agenda.
Chief among them is a consultation on the government’s push to criminalise wage theft, a promise Labor took to the 2022 election and a long-time rallying cry for Minister for Employment and Workplace Relations Tony Burke.
The Fair Work Ombudsman tallied around half a billion dollars of underpayments in 2021-2022, the paper notes, “indicating that non-compliance is widespread and requires stronger deterrence through stronger penalties.”
Although Victoria has laws which criminalise some forms of wage theft, similar rules do not exist at the Commonwealth level.
While the monetary and societal cost of wage theft is apparent, exactly what should be criminalised, and what regulatory tools are available, are both up for question.
One model proposes separate offences for ‘knowledge-based’ misconduct, where an employer knows they are underpaying staff, and ‘recklessness-based’ offences, where employers take unjustifiable risks, deliberately or not, which lead to underpayment.
Another model suggests a ‘tiered’ system, where two offences are inserted into the Fair Work Act, covering both ‘knowledge-based’ and ‘recklessness-based’ misconduct while “reflecting a more graduated approach to criminal culpability.”
The consultation process is receptive to carve-outs for businesses which amend or take action to prevent underpayment: in a summary document, the DEWR said the consultation will consider if “criminal penalties should not apply to employers who make an honest mistake and take steps to fix it.”
For those who do fall foul of the new laws, the penalties could be significant.
“The intent is for the maximum penalty for the wage underpayment offence to be comparable to maximum penalties for similar offences in other Commonwealth laws, such as the Corporations Act 2001 or the Competition and Consumer Act 2010,” the paper states.
Under the Corporations Act 2001, a wide variety of corporate misconduct commands penalties of between six months and fifteen years imprisonment.
The paper also broaches the possibility of serious civil penalties for wage underpayment, as “current civil penalties are not effectively deterring non-compliance with workplace obligations.”
For individuals, fines could lift to $82,500, with serious contraventions earning a $825,000 penalty.
For bodies corporate, fines could lift to $412,500 and $4.125 million, respectively.
Under an alternative penalty scheme, the paper asks if maximum fines could equal five times the top penalties currently prescribed by the Fair Work Act for other offenses.
Those fines currently top out at 600 penalty units, or the equivalent of $165,000, implying potential penalties of $825,000.
Simultaneously, the DEWR released a consultation paper on the Albanese government’s proposed ‘Same Job, Same Pay’ reforms, which it intends to legislate in the Spring sitting of Parliament.
That proposal refers to the government’s pledge to ensure employees and labour-hire workers are paid the same rate for completing the same task, a move Burke says will boost wages for labour-hire workers who may be paid less under current employment settings.
Without seeking to change the way businesses can secure labour hire services for temporary surges in work and short-term goals, the paper asks if the Fair Work Act should include civil remedies for breaching any new rules.
It also asks if new entitlements and obligations should apply differently to small businesses, reflecting the difference in bargaining power that SMEs may have compared to major corporations which seek labour hire services.
Reflecting the government’s broad focus on the gig economy, a separate consultation paper cuts through the thicket of ’employee-like’ work, and asks how the Fair Work Commission could enshrine minimum pay levels and conditions for ‘platform’ workers.
Unions and gig economy platforms like Uber and Menulog are already meeting halfway on those issues, the paper notes, suggesting a willingness to find a middle-ground between traditional employment and the independent contractor model.
“All workers should have access to minimum rights and protections regardless of whether they are characterised as an employee or an independent contractor,” the paper says.
The consultation paper asks how the Fair Work Commission should be empowered to adjudicate in the space, what “guardrails” should surround its powers, and what kinds of minimum standards should be established, among other key concerns.
A fourth consultation paper seeks input on anti-discrimination rules in the workplace.
Among a litany of suggested updates, it centres on the question of whether the Fair Work Act should expressly ban “indirect” discrimination.
The example given by the paper describes a scenario in which a workplace requires employees to stand up on the job, which could indirectly discriminate against those with a physical disability.
The paper also asks if experiencing domestic or family violence should be treated as a protected attribute under the Fair Work Act, barring an employer from undertaking adverse actions like limiting their hours or enforcing a demotion.
Businesses and stakeholders have until 11pm AEST on Friday 12 May 2023 to comment on the consultation papers.
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
