‘Wage Theft’ is officially now a crime that businesses in Victoria will face if they dishonestly fall foul of their obligations to pay wages, superannuation or other employee entitlements, applying from 1 July 2021. However, the existence of Federal and State schemes that perform similar functions does give rise to potential constitutional challenges to the new laws.
Up until very recently the term ‘Wage Theft’ was invented to coin a phrase that would capture the scope of slip ups, misdemeanours and more serious deliberate underpayments by employers across Australia. The Australian Council of Trade Unions have lobbied for a strengthening of laws to address the issues associated with underpayment of wages that has snowballed largely since the shocking revelations of the practices engaged in by the 7-Eleven business and its franchise network across Australia.
The Federal Government has stated it will look to criminalise the most serious forms of underpayment of employment entitlements. And while a Senate Inquiry has been on foot now for some months (report now due 3 December 2020), the Labor State Government in Victoria has been quicker to introduce and pass laws criminalising wage theft with fines and jail time a risk for businesses and individuals with operations in Victoria.
What can I get prosecuted for?
The wage theft offences include:
- withholding employee entitlements dishonestly;
- authorising or permitting the withholding of employee entitlements dishonestly;
- falsification of an employee entitlement record to:
- dishonestly obtain financial advantage or
- prevent exposure of a financial advantage obtained;
- failure to keep (including failing to make, destroy, deface or conceal) an employee entitlement record to:
- dishonestly obtain financial advantage or
- prevent exposure of a financial advantage obtained.
An employer or individual charged can mount a defence if they can demonstrate that they had exercised due diligence to prevent the breach from occurring or to otherwise ensure the employee was paid their employee entitlements.
What are included as employee entitlements?
Employment entitlements are defined as covering:
- wages or salary, allowances and gratuities, and the attribution of annual leave, long service leave, meal breaks and superannuation and;
- where the above entitlements are payable under a relevant law, contract or agreement (whichever is the more generous).
What is meant by “dishonest”?
The legislation specifies that a “reasonable person” test will be applied as part of the assessment as to whether dishonesty is involved.
The legislation also specifies that, even if an employee consents to their entitlements being withheld, this cannot be considered when determining whether the employer has acted dishonestly in withholding the entitlements.
What is proposed to take place, is an assessment as to whether there is evidence to substantiate that the employer knew, or should have known, that the entitlements were payable.
What are the penalties?
The new wage theft offences risk the following penalties:
- fines of up to $198,264 for individuals;
- fines of up to $991,320 for companies; and
- up to 10 years’ jail.
Can I be prosecuted under both the new wage theft laws and the Fair Work Act for breaches?
Potentially yes. While the Fair Work Act 2009 is an industrial law providing a Federal civil legislative regime for the ‘establishment and enforcement of terms and conditions of employment’, the Victorian Wage Theft Act 2020 provides a State based criminal regime to ‘create offences relating to the theft of employee entitlements and the keeping of records relating to employee entitlements’.
However, the similarities in purpose do give rise to the likelihood that the first State based activity under the Victorian scheme, will likely attract challenges on constitutional grounds.
Such a challenge would be brought on the basis that the Fair Work Act 2009 ‘covers the field’ and therefore prevails over the Victorian State laws where there is an inconsistency.
If the Federal Government does proceed with creating a range of criminal offences, then this would likely overrule any doubt about whether the Victorian State laws can continue to operate in relation to employers covered by the Fair Work Act 2009, thereby rendering the Wage Theft Act 2020 obsolete.
What about the other States/Territories?
The Labor State Government in Western Australia completed an inquiry into wage theft in late 2019 and, as a result, have indicated an intention to strengthen the WA State based industrial legislation and will consider criminalising wage theft if the Federal Government falls short in that respect.
The Labor State Government in Queensland completed their own inquiry into wage theft in 2018 and have considered implementing measures to combat underpayments, including a more streamlined small claims process to make it easier for employees to recover underpayments through State based Tribunals/Courts. They may still look to criminalise the issue of wage theft in the same way that the Victorian’s have if the Federal Government fails to implement measures.
The other States and Territory Governments have not indicated a positive intention to implement their own wage theft laws. However, the Labor opposition in New South Wales and South Australia have indicated that, if they win Government, they will introduce legislation criminalising wage theft in their States.
Do I need to be doing anything?
Now more than ever, you need to be ensuring that you are paying the correct rates of pay and other associated employment entitlements under the National Employment Standards, Modern Awards, Enterprise Agreements and the contracts of employment you have with your employees.
1 July 2021 is the date by which you must finally have your workplace compliance obligations in order, otherwise you risk the chance of being one of the first employers to face criminal charges for failing to take the opportunity to do the right thing.
It would be prudent to get independent experts in to conduct an audit to ensure you are meeting all legal obligations as an employer. Get in touch with Australian Business Lawyers & Advisors at firstname.lastname@example.org for a detailed Scope of Work and cost estimate for your business today.