Are you sure you are paying your employees what they are entitled to? You could be committing a criminal offence – unpacking the new wage theft laws

In this article, we look at how the new ‘wage theft’ amendments to the Criminal Code (Queensland) came to be and what they mean for employers.

What is wage theft?

Broadly speaking, wage theft occurs when employers deliberately do not pay employees their lawful entitlements, including superannuation, award rates, penalty rates, leave and other entitlements set out in the Fair Work Act 2009 (the FWA) or industrial instruments (Modern Awards or Enterprise Agreements) formed under the FWA.

‘Deliberate’ does not simply mean that the employer chose to not pay what an employee was entitled to, it also covers instances when an employer does not apply the terms of an industrial instrument that pertains to the workplace, when they should have known it applied.

The issue of ‘wage theft’ became prominent in 2015 when the ABC documentary series Four Corners revealed 7- Eleven’s use of illegal work practices to reduce its labor costs.[1] Since then, the issue has continued to escalate and both State and Federal Governments have identified that they have to take steps to address the economic and social impact of the activity.

In recent years, the Fair Work Ombudsman (the FWO) has actively pursued underpayment claims and conducted audits to identify breaches of the FWA, to ensure employers are aware of their obligations and that employees are paid no less than their minimum entitlements.

In addition to the activities of the FWO, some state governments, including Queensland, undertook reviews of the impact of wage theft to address an issue that appears to be increasingly problematic. The Queensland inquiry determined that, based on the evidence available, which may not capture all the instances of alleged wage theft, $2.5 billion is lost from the Queensland economy every year. This amongst other considerations underpins the recent legislative changes.

Investigation and recommendations

The Queensland Government introduced the Criminal Code and Other Legislation (Wage Theft) Amendment Bill 2020 as a result of a report prepared by the Queensland Parliament - Employment and Small Business Committee (the Committee).[2]  The Committee made 17 recommendations aimed at reducing the instance of ‘wage theft’ and making it easier for employees to pursue payment of their unpaid entitlements. The 17 recommendations are annexed to this article.

The most controversial of those recommendations, was that wage theft be made a criminal offence where the conduct is proven to be deliberate or reckless (Recommendation 15). Those provisions passed Parliament and were assented to on 14 September 2020, amending the Criminal Code (Queensland) and other relevant State legislation.[3]

Criminalising ‘wage theft’

The issue of criminalising wage theft is not unique to Queensland. The Victorian Government has implemented similar provisions and other states are considering the option. The Federal Government has also formed an Industrial Relations working group, to review compliance and enforcement measures. The concept of increased penalties, possibly criminal, has been identified as a real possibility in reforms expected to be tabled in early 2021.

The Queensland legislation means that employers could now face up to 10 years’ imprisonment under the criminal provisions where their conduct is proven to be deliberate or reckless; or 14 years if the conduct is proven to be fraudulent and the amount in issue is between $30,000 and $100,000. There are heavier penalties for fraud amounting to more than $100,000.

The changes have been made through minor amendments to the Criminal Code (Queensland), by including a new section 391(6A) (Stealing) as follows:

For stealing that is a failure to pay an employee, or another person on behalf of the employee, an amount payable to the employee or other person in relation to the performance of work by the employee...

and s408C (Fraud):

A person who dishonestly—

(1) (a)applies to his or her own use or to the use of any person—

(i) property belonging to another

and

(2)  …the offender is or was an employer of the victim.

Existing Compliance and Enforcement

The FWO regularly publish media releases about back payments recovered for employees, self-audit outcomes and prosecutions in the Federal Court, amounting to many millions of dollars each year.

Most recently the FWO reported on the outcome of random audits of fast food, restaurant, café and retail operators in West End prior to the COVID-19 pandemic, resulting in $309,073 being reclaimed for 369 workers across 44 businesses. The audits uncovered that 88% of businesses investigated were not compliant with Australia’s workplace laws. The most common contraventions were failures to correctly pay penalty rates, followed by underpayments of the minimum hourly wage. It is those issues the new ‘wage theft’ laws will address.

Getting it right is important

Whilst it has always been important to get your business’s employment administration right, the stakes have now gotten higher, with the risk of criminal penalties being added. It is now vital that you can demonstrate you have exercised proper due diligence by taking all reasonably practicable steps to ensure your business complies with its industrial obligations. Employment law advice should be sought, payroll compliance audits conducted and control measures applied and regularly reviewed, but if you are being investigated for criminal conduct then you should consider hiring a criminal defense attorney for legal protection.

We know from experience that accountants, bookkeepers and HR advisors are not always sufficiently aware of the employment provisions that relate to your business, nor are they strictly obliged to. There is no substitute for getting professional advice from a lawyer experienced in employment matters and advising businesses. Proactive advice will help you to establish compliant processes and help protect your business investment. Importantly, legal professional privilege ensures that any confidential legal compliance advice you obtain cannot be used in evidence against your business interests and those of its corporate officers.

Our team have real world experience in managing workplaces and advising employers and are ready to assist you. If you are concerned that your business could be at risk, do not ignore those concerns. We encourage you to contact us on 07 3160 0000 or email us at reception@activelaw.com.au.

Annexure - Recommendations

Arising from the Committee’s 17 recommendations about how the issue of wage theft can be addressed, 11 of those recommendations were matters that only the Federal Government could resolve. The 17 recommendations were:

1. the Queensland Government conduct a public education campaign to assist in the fight against wage theft, including outlining information on the findings from this inquiry and the measures the Queensland Government is taking in response, and how and where affected workers can go for help to recover their lost wages.
2. the Queensland Government re-establish the tripartite Industrial Relations Education Committee under the auspices of the Office of the Industrial Relations to conduct visits to schools, TAFE and VET providers, and universities. The visits would be conducted on an opt-in basis and provide information focusing on the rights and responsibilities of both workers and employers.
3. the Queensland Government, through the Department of Education, work with the higher education sector in Queensland to ensure international students have access to relevant information and advice on their workplace rights in Australia, including the right to join a union and where to go for further information.
4. the Federal Government introduce a national labour hire licensing scheme so the benefits of the Queensland scheme can apply across the country.
5. the Queensland Government ensure its current procurement policies allow for appropriate and proportionate action to be taken against companies that have underpaid workers.
6. the Federal Government consider measures to improve worker access to representation in the workplace and ensure compliance with industrial instruments, using the model of the Industrial Relations Act 2016 (Qld).
7. the Federal Government appoint additional Federal Circuit Court Judges in Queensland, and ensure Queensland retains its proportionate share of Federal Circuit Court judges.
8. the Queensland Government review and take actions available to it, to ensure that wage recovery processes for Queensland workers are simple, quick and low-cost. This should include further investigation of the following options:
   
   
9. establishing a dedicated industrial division within the Queensland Magistrates Court, in line with the example in Victoria
10. investigating the inclusion of the Queensland Industrial Relations Commission or Industrial Court as an eligible state court under the Fair Work Act 2009 (Cth)
11. reviewing relevant forms and processes to ensure the legal process is simple and user friendly for workers and their representatives
12. waiving or reducing current court filing fees for wage theft matters.
13. unpaid superannuation be included as a recoverable entitlement under the Fair Entitlements Guarantee scheme and the Fair Entitlements Guarantee scheme be extended to temporary overseas visa workers who are currently denied access.
14. that the Federal Government fund a workplace rights information and support service based in Queensland, as is funded for other Australian jurisdictions and was formerly the case, up until the removal of funding in 2016 by the then Federal Government.
15. the Federal Government take immediate steps to appoint additional Fair Work inspectors in Queensland under the Fair Work Act 2009 (Cth).
16. the Federal Government establish a full, independent review into the performance, resourcing and culture of the Fair Work Ombudsman to ensure that it can respond to wage theft and support affected workers in an effective and timely fashion. Among other things, the review should consider the findings and recommendations of the Best Practice Review into Workplace Health and Safety Queensland which have driven a cultural shift from education to compliance.
17. superannuation be included as an industrial entitlement in the National Employment Standards.
18. the Fair Work Commission be given the power to assess the status of an employment contract similar to that available to the Queensland Industrial Relations Commission under the Industrial Relations Act 2016 (Qld), and, further consideration be given to removing the ‘reckless defence’ from the offence of sham contracting under section 357(2) of the Fair Work Act 2009 (Cth) and introducing a new ‘reasonable person’ test for determining whether an employer has engaged in sham contracting.
19. the Queensland Government legislate to make wage theft a criminal offence, where the conduct is proven to be deliberate or reckless. The Queensland Government should consider the variety of models and approaches for criminalizing wage theft that were presented to the inquiry and consult further with stakeholders in regard to a preferred model.
20. an automatic termination date be legislated for remaining Work Choices ‘zombie’ agreements, with consideration given to necessary transitional arrangements and protections to ensure no workers are disadvantaged as a result.
21. reform of the Fair Work Act 2009 (Cth) to more adequately accommodate emerging forms of non-traditional employment. This should include consideration of law reform to broaden the definition of worker and provide broader access to the benefits of collective bargaining, minimum standards for pay and conditions, and access to the Fair Work Commission.

[1] Adele Ferguson, 7-Eleven: The Price of Convenience, Four Corners, Australian Broadcasting Commission, online https://www.abc.net.au/4corners/7-eleven-promo/6729716

[2] A fair day’s pay for a fair day’s work? Exposing the true cost of wage theft in Queensland,

Report No. 9, 56th Parliament Education, Employment and Small Business Committee,

November 2018 < https://www.parliament.qld.gov.au/Documents/TableOffice/TabledPapers/2018/5618T1921.pdf>.

[3] Schedule 1, Criminal Code Act 1899.

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The material distributed is general information only. The information supplied is not and is not intended to be, legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.