Recently, there has been considerable media focus on underpayments of employee wages and entitlements.

In some cases, amounts involved have run into millions of dollars.

This article examines the legal issues surrounding what is sometimes (often erroneously) called ‘wage theft’. It also considers potential ramifications for employers who are accused of either underpayment, non-payment or late payment in respect wages and entitlements of their workers.

At the outset, it should be acknowledged that underpayments do not always arise through intentional or untoward behaviour. Indeed, many cases stem from employer confusion about Australia’s complex system of workplace relations.

It should also be noted that ignorance of correct entitlements is generally not an excuse for underpayment under the law.

Who Regulates This?

First, it is important to clarify which agencies may become involved in this area.

For unpaid superannuation, the Australian Taxation Office has the chief role. Where workers have the courage to sue their current (or former) employer, claims are issued in a local or Magistrates Court.

Regarding underpayments more generally, the Fair Work Ombudsman (FWO) often becomes involved. This is the case for both one-off cases and large situations which may involve significant numbers of workers.

The FWO can help workers to recover unpaid wages, annual leave, redundancy payments and other miscellaneous payments. Where appropriate, it can issue legal proceedings against employers.

Occasionally, the FWO targets certain industries for audit activities. This is particularly the case for those industries known to have high incidences of underpayments. Occasionally, the construction and allied industries are targeted.

Finally, in the construction sector specifically, the Australian Building and Construction Commission has a role to play too. They have information on their website in this area and they have a contact service which allows those in the industry to make inquiries as to proper and lawful employee entitlements. They also play a small role in relation to audits and ensuring compliance with laws and regulations in the area.

Awards

Across most industries, workers are covered by awards. These set out minimum wages, entitlements and employment terms and conditions.

For each worker, employers must determine whether or not they are covered by an award, which award they are under, their classification under that award and whether or not they are indeed being paid their full wages/salaries and entitlements (overtime, leave etc.) to which they are entitled under their award.

HR departments need to be on top of the issues, as they not only have or should possess technical expertise in the area but could potentially be considered accessories to any contravention and thus brought into the ‘net’ of liability.

Also potentially liable can be advisors, senior executives or directors.

Wage Theft

In Victoria, underpayment or non-payment of wages it is now a criminal offence where this results from either intentional or reckless conduct. Substantial penalties can apply for directors and or senior company staff who may be involved.

Queensland has passed similar laws whilst New South Wales has recently implemented payroll tax measures to crack down on employee underpayments.

Serious Consequences

For businesses both large and small, ramifications of breaches can be serious. Where matters proceed to the Federal Circuit and Family Court of Australia, orders can be made against not only the business itself but people in the organisation (as set out above) as well.

Potentially, this can include orders for:

• Repayment of monies owed (which can stretch back over many years) along with imposition of substantial penalties.
• Audits to be performed
• Staff involved to undergo education programs (at the employer’s expense)
• Display of notices at the premises which indicate that the business has been involved in a contravention
• Ancillary and further orders, with the court having wide discretion as to what orders it can make.

Depending on their severity, these types of orders can make or break businesses. In one case for which I acted for the defendant, penalties of around a quarter of a million dollars plus other orders referred to above were issued despite the business owner showing genuine remorse over what had happened.

Get Help and Advice

As mentioned above, many cases of underpayments result from confusion and system complexity.

Especially where multiple awards could potentially apply, it can be difficult for employers to be certain about which awards cover particular workers along with minimum rates which are applicable under the award in question.

To cope with this, robust and effective systems and procedures are needed. In some cases, audits may be warranted.

Help and advice should be sought. Whilst paid legal help may be needed, free resources may be available through local chambers of commerce. The Fair Work Ombudsman also has an educative function. They can be consulted in respect of these issues.

As I have seen first-hand, courts will not usually listen to excuses.

Getting things right is critical.