5.1
The committee heard that everyday Australians want to see more measures put in place, particularly by government, to protect them from inadvertent as well as unscrupulous and deliberate wage theft:
Workers like me want to see the government fix the problems that currently make it easy for companies to take advantage of workers and underpay them.
5.2
Submitters and witnesses to the inquiry proposed a range of measures for consideration.
Improving protections for workers
Improving support payments
5.3
The committee heard from Ms Zoe Ranganathan, President of the National Union of Students (NUS), that basic protection of workers could be improved through increases to minimum social support payments to enable workers to leave abusive workplace relationships and still be able to afford somewhere to live and food to eat.
Protecting vulnerable workers
Extending the Fair Entitlements Guarantee
5.4
The committee heard that additional protections should be considered for vulnerable workers, including the extension of the Fair Entitlements Guarantee (FEG). As currently constituted, the FEG does not apply to contractors or to temporary visa holders.
5.5
The Migrant Workers' Taskforce recommended that the FEG scheme be expanded to include temporary visa holders in order to protect them when companies go broke, or they are exposed to phoenixing activity. Following this report, in March 2019, the Australian Government agreed that it would:
… examine whether to extend the FEG to migrant workers with work rights. Where these workers have been doing the right thing by satisfying their taxation obligations, the Government considers it reasonable that they, in turn, be protected by the FEG program. Consultation will soon commence on this proposal.
5.6
However, as no further action appears to have been taken, several witnesses reiterate the need for this measure, noting the Australian Government's inaction. The Migrant Workers Centre (MWC) explained to the committee:
It was clear that in a liquidation, this was after we'd raised recovery action with this business, they had stripped the assets, leaving insufficient funds to pay the workers their leave, but also their accrued leave and their stolen wages. Because temporary migrants were excluded from the Fair Entitlements Guarantee they walked away with just cents in the dollar for their accrued leave.
5.7
The National Foundation for Australian Women (NFAW) and others also spoke of the need for regulatory reform to address contract workers, as they are also ineligible to access the FEG.
Wage insurance scheme
5.8
WEstjustice recommended the establishment of a wage insurance scheme, funded by employer premiums, compulsory insurance and/or penalties for breaches of the Fair Work Act 2009 (Fair Work Act). It argued that such a scheme should be accessible to workers who are unable to access their unpaid wages via other legal frameworks.
Protections for migrant workers
5.9
A number of witnesses told the committee that protections for migrant workers need to be put in place to ensure that they do not either fear or suffer negative immigration outcomes as a result of pursuing underpayments. It was recommended that the existing Assurance Protocol between the Fair Work Ombudsman (FWO), the Australian Taxation Office (ATO), and the Department of Home Affairs be strengthened, and a strong firewall be established to ensure that underpaid workers are not at risk of having their visa cancelled. However, as was pointed out, this could result in reduced abilities of agencies to collect intelligence about workplace laws and other criminal activity and may, in any case, not fully address temporary workers' concerns.
5.10
The McKell Institute went further, recommending that the Fair Work Act be amended to ensure that workers who breach visa conditions be protected by workplace protections under the Act. The Institute, and other witnesses recommended that visa conditions which create vulnerability be eliminated—for example, by removing conditions which make workers dependent on their sponsoring employer, removing the required 88 days of agricultural work for Working Holiday Makers, and extend the time a Working Holiday Maker can stay with the one employer. The MWC also called for the root causes of migrant worker vulnerability to be removed, suggesting:
… reform [be] focused on recognising the social inclusion benefits of permanent migration and clear pathways from temporary to permanent; assessing skills shortages independently and addressing them through more coordinated education and immigration policies rather than just by employer demand; and increasing workers' rights to move between employers so that they can leave exploitative situations. Another is to legislate to confirm that all employees are entitled to minimum employment standards regardless of visa status …
5.11
Witnesses, including the McKell Institute and WEstjustice, and Associate Professors Laurie Berg and Bassina Farbenblum, additionally recommended the introduction of a temporary bridging visa to enable temporary migrants to stay in Australia to resolve underpayment claims.
5.12
The McKell Institute warned that a comprehensive revision of the temporary migration program is needed in order to better protect migrant workers.
5.13
Some submitters, such as Dr Stephen Clibborn, called for other measures relating to education, enforcement, and support to assist migrant workers. These measures, which have the potential to benefit workers more broadly, are discussed below.
Enhanced adverse actions protection
5.14
Mr Liam O'Brien, Assistant Secretary with the Australian Council of Trade Unions (ACTU), told the committee that 'there are general protection provisions but they are woefully inadequate' at protecting workers against adverse actions. The Australasian Centre for Corporate Responsibility (ACCR) and LUCFR Super shared these concerns for workers making allegations of underpayment.
5.15
Noting that adverse actions like loss of hours or not being re-employed can be notoriously difficult to prove, witnesses, including the National Tertiary Education Union (NTEU) and the Queensland Government, advised that enhanced adverse actions protections for workers and workplace representatives are required.
5.16
The National Retail Association (NRA) proposed that protections be achieved by extending whistle-blower protections to the Fair Work Act to cover individuals disclosing information about wage theft.
5.17
However, the Australian Chamber of Commerce and Industry (ACCI) submitted that existing protections under the Fair Work Act, and available via court injunctions, are sufficient to protect workers and argued against reforms, remarking:
Employees querying their wages enjoy substantial protections, and cannot be sacked or, punished.
More accessible avenues for justice
5.18
The committee received extensive evidence showing that current avenues for redress and justice do not meet the needs of underpaid workers, particularly low-paid and vulnerable workers—with existing options proving variously intimidating, inaccessible, costly, complex, inefficient and ineffective.
5.19
Ms Annie Wang, a victim of wage theft, said:
We need tough wage theft laws nationally to deal with the root of the problem and to provide a quick and accessible process for workers to recover their stolen wages.
5.20
The committee heard that few private firms offer employment law advice on a 'no win no fee' basis, given the time required to run such investigations and cases, and that there is limited public funding for employment law services. Furthermore, some community-based services are advice-only services and cannot provide legal representation.
5.21
At odds with a number of submitters, the Ai Group maintained that, in relation to superannuation, strong laws and appropriate mechanisms already exist to ensure that payments are made to workers and that any underpayments are recovered.
5.22
Dr Tess Hardy and others, proposed that a deeper review of the redress systems is needed, including the split of responsibilities between regulators, in order to help stem the underpayment of employees.
Improving small claims
5.23
The committee received a range of evidence highlighting the need for improvements to the small claims process for claimants, including:
increases to the jurisdictional limit of the Fair Work Division of the Federal Circuit and Family Court (FCFCA), between $30,000 and $100,000 to enable it to hear a wider range of claims;
extension of small claims procedures to local courts, civil tribunals and/or state industrial tribunals;
a dedicated list for underpayment matters, preferably with dedicated (and additional) judges;
the ability to lodge group complaints or representative proceedings, to reduce the resources required to bring and hear matters relating to the one employer or employer group;
reduction or abolition of filing fees for underpayments claims;
prescribed timeframes for complaint resolution;
simplified court processes and a reduction of evidentiary burdens on workers; and
provisions enabling civil penalties against employers;
the expansion of remedies to include compensation for workers,
remedial orders to achieve reform (e.g. requiring employers to undergo training); and
the establishment of a restructured small claims process with low fees, simplified court processes and strict time limits—either as a new jurisdiction within or alongside the Fair Work Commission (FWC), or a separate small claims tribunal.
Allow for recovery of costs
5.24
Maurice Blackburn Lawyers and Dr Tess Hardy, amongst others, supported the notion that successful complainants be able to recover their legal costs. Mr Josh Bornstein from Maurice Blackburn Lawyers said:
… one of the reasons it's so expensive and difficult to go to court about wage theft is that, even when you win, you still have to pay your legal costs. If the system were changed so that, if you win your case, the legal costs are paid by the other side, which is often the case in litigation, that would defray the expense of doing so.
5.25
Dr Hardy supported holistic reforms to the institutional frameworks at both state and federal levels, and called for the sharing of justice, compliance, and enforcement functions across a wider range of bodies, including unions, legal practitioners, and community legal centres. She suggested that cost shifting be made one-way to prevent adverse costs orders being made against claimants, postulating, along with the NSW Society of Labor Lawyers, that this may encourage or enable more third parties—legal practitioners, unions and community legal centres—to assist claimants.
Improving education and advocacy
5.26
Witnesses highlighted the role of civil society organisations including unions, migrant community organisations, and community advisory and legal centres—but also suppliers, lead companies, consumers, and others—in addressing underpayments, a view supported by workplace relations research:
Another recurring theme in much of the latest literature … has been how non-state actors may contribute to and be enrolled in the regulatory process. This includes not only the traditional IR [industrial relations] stakeholders, such as employer associations and unions, but institutional investors, company boards, lead firms—those firms which sit on the top of supply chains or at the head of franchise networks—private practitioners, civil society organisations and others. In my view, a more holistic and inclusive approach to enforcement is essential for ensuring that compliance will continues [sic] even after an inspector moves on.
5.27
The committee heard that, for migrant workers afraid of government authorities, community-based organisations are likely to be more effective, supporting witnesses' recommendations for additional funding for these bodies for the purpose of both education and representation. WEstjustice recommended recurrent funding for community legal services, advising:
The value of community organisations in assisting vulnerable workers has been widely recognised. In 2009 the FWO conducted a review of the need for and provision of Community-Based Employment Advice Services in the light of the introduction of the Fair Work regime (Booth Report). The Report highlights the importance of Community-Based Employment Advice Services for vulnerable workers.
5.28
Community legal centres have an important role in educating workers about their rights to fair pay and conditions, as well as how to address underpayments and other workplace abuses. Furthermore, they can provide advocacy and representation in order to change the balance of power between workers and employers and change workplace culture. Ms Annie Wang spoke of the importance of these resources:
I also want to share this experience with the committee to encourage more support and funding for organisations like the Fair Work Ombudsman and the Young Workers Centre, because, as much as I hate to say this, so many Australian workers are being exploited every day, and without these free legal services many of them will continue to be exploited. Everyone deserves a fair go, including every single Australian worker.
5.29
Submitters supported increases in funding to support education campaigns—both government and community led—including for specific sectors (for example, for migrant workers), with the NFAW emphasising the need for a 'properly resourced education campaign to ensure both employers and employees know their rights and obligations'. Mr Shirley Jackson from Per Capita said:
We should be aiming for prevention, not retribution. It should never get to that stage. The best way we can prevent these things happening is by having an educated workforce with a strong collective voice at work, making sure that small businesses who are entering this space have the support they need to go out and learn exactly what their responsibilities are.
5.30
Submitters clearly linked improvements in education of both workers and employers to preventing and identifying wage theft, with the NFAW noting that 'no penalties alone are likely to have a broad impact on employer conduct'. Unions also spoke to their role in educating workers and employers about wages and employment conditions, and their positive impact on reducing wage theft.
5.31
The Young Workers Centre, the South Coast Labour Council, the Queensland Government, the UNSW Law Society, and others supported the inclusion of employment literacy as a mandatory part of the secondary school curriculum, given the high proportion of wage theft affecting young workers.
5.32
Likewise, the ATO acknowledged the importance of education in its work:
One of the things we do try to do with employers is to work, firstly, to make sure that they really understand their obligations and that we can support them to meet those obligations. Our focus on our communications with employers in relation to unpaid super is primarily about helping them to get it right, making sure they can meet those obligations and ensuring that they are prepared to come and talk to us if they are having trouble meeting those obligations so that we can get them to lodge a charge statement and then work with them to enter a payment plan if they need that to get those amounts paid. Our focus really is more on helping them get it right and supporting them where they are struggling with paying.
More effective compliance and enforcement
5.33
Ms Arabella Wauchope from the NUS, contended that existing penalties have not deterred employers from underpaying staff, particularly international students, and that stronger penalties—along with improved collaboration and education—would reduce underpayments and improve outcomes for workers. Mr Trent Whitehand-Willick stressed that, at present:
The overwhelming message that is sent to me is that we the employees are an unvalued means to financial success, which is reinforced by the government's tacit acceptance of this culture.
Improve regulator resourcing
5.34
As discussed in Chapter 3, a number of witnesses shared the view that resourcing of regulators is not sufficient, and they recommended that additional resources be allocated to the FWO and FWC so they can proactively undertake underpayment recoveries and enforcement activities. Dr Clibborn underscored the importance of this recommendation:
On the investment in the Fair Work Ombudsman that you mentioned: I see this from the government point of view, of having to invest in resources to solve this problem. Those resources can be monetary, with an extremely high investment in the Fair Work Ombudsman, or, ideally, a combination of an increase and allocating those resources to others outside of the state to be part of that enforcement solution.
5.35
This recommendation was supported by the ACCI, which argued for additional inspectors to assist companies to meet their obligations and address complaints. They also argued for more reliable, legally reliable advice—similar to the ATO's public and private rulings.
5.36
Additionally, Dr Clibborn highlighted the value of supporting co-monitoring and enforcement as a way of sharing the compliance load and improving its effectiveness, though for example, an increased role for unions.
Increased role for unions
5.37
The Australian Manufacturing Workers' Union (AMWU) noted a link between the curtailing of union powers and enforcement and increases in wage theft—with worker isolation, the decline of industrial disputation, and reductions in rights of entry and inspection of records corresponding with higher prevalence of underpayments. Mr Bornstein highlighted that one ready-made solution already exists—in the form of trade unions—a view shared by Dr Carina Garland from the Victorian Trades Hall Council:
… we think that the federal government needs to reinstate the union right of entry powers for inspection in the IR legislation. We think that any rights enshrined in legislation are meaningless if you can't enforce them. Employers are already obliged to pay workers their minimum entitlements, and they don't. That suggests there's a problem with enforcement, and we know that unions are a really important part of enforcing workplace rights. When I say 'unions', I mean both the institution of unions but also the unions that exist in the workplace as organised labour, as members of unions with delegate and HSR [health and safety representatives] structures in workplaces. Unions must be involved in investigating instances of wage theft.
5.38
Ms Emma Dawson and Mr Jackson from Per Capita explained how the effectiveness of unions in reducing wage theft is recognised in other developed nations. Dr Clibborn summarised:
… in relation to the sectors where we find employer noncompliance and wage theft to be most common, they are sectors with very low union density. The advantage of unions being involved in enforcement is not only their role as an inspector, if you will, but also the fact that workers, as union members, as part of the union, are within the workplace already, so that increased threat to an employer of an inspection of some kind or, rather, detection in general will provide a deterrent factor.
5.39
The committee heard that greater rights of entry, access and inspection for unions would help to address underpayments by:
providing a deterrence effect on employers;
raising awareness of underpayment;
identifying and uncovering wage theft;
facilitating the resolution of complaints within the workplace, reducing demands on other processes, as well as costs for workers, employers, and the taxpayer;
enabling workers to unite and provide avenues for addressing wage theft; and
reducing the burden on regulators, enabling them to redeploy their resources elsewhere.
5.40
Expanding on these points, the ACTU highlighted the importance of unions in identifying and addressing wage theft, with Mr O'Brien telling the committee:
I think this is why it is so important in those sectors to empower the unions that are incentivised to identify and rectify wage theft, because of the membership models that we have and, indeed, to have stewardship of industries as well. The way in which our unions are structured across industries means that we are the most appropriate people to go out there and combat this scourge.
5.41
Mr Bornstein from Maurice Blackburn Lawyers explained that regulator resourcing would never be sufficient to address underpayment, and that empowering workers to act collectively is vital:
Even in a strongly unionised workplace, with a collective bargaining culture and collective agreements, you will find it's not a guarantee that there won't sometimes be problems with underpayment. But, where those problems arise, they will be addressed far more quickly, cost-effectively and efficiently than in environments which involve huge disparities in power, where there is not a collective bargaining culture.
5.42
Numerous witnesses proposed that union powers be extended, to enable them to advocate for both members and non-members (if they so choose), including:
permitting the FWO to refer underpayments complaints to a trade union—where the complainant agrees;
amending right of entry provisions—to allow trade unions to monitor, audit and investigate suspected underpayments for all employers within that workplace (preventing individual workers being victimised); and
improving provisions relating to access to records— including penalties for providing false or misleading records, as well as enabling access to records of former employees, and amendments to reflect technological changes in how information is stored and retrieved (e.g. cloud-based payroll information).
5.43
Mr O'Brien pointed out the benefits of union involvement:
… [if registered representatives of workers were permitted to do inspections] there would be thousands of representatives of working people having the same powers to inspect wages and recover money as the ombudsman. Then I dare say we would have significantly less wage theft in this country and we would have a significantly higher national income, given the income that would then flow to working people.
Enforcement
5.44
Several witnesses told the committee that they do not think employment laws are being sufficiently enforced to prevent the underpayment of employees. ACCR and LUCFR Super observed that voluntary compliance initiatives and self-regulation are insufficient, while Per Capita stated that lack of enforcement 'is sending a message that it [government] is soft on crime provided you run a business'.
5.45
Dr Clibborn advised the committee of the attributes of an effective system, including that enforcement is more effective than penalties:
… research tells us that measures directed at enforcement are more likely to increase employer compliance than are those focused on penalty. We should make employers believe that they are likely to be caught and increase the legitimacy of our laws by being seen to enforce them seriously. This will take an increase in resources, both monetary and other resources—first, significantly increased funding to the Fair Work Ombudsman.
5.46
Mr O'Brien was of the opinion that currently, businesses have a low expectation of being caught for underpayment:
If the likelihood of being caught is so low—and, again, if we were to think of the Fair Work Ombudsman and the small fraction of society that they can touch with their audit and compliance work, the likelihood of being caught is low. Finally, there are the consequences. Deterrence plays a role, and indeed consequences, whether they be civil or criminal, are important in terms of deterring conduct. But, if the consequences as they are today are largely—firstly, if I do get caught, which, as I've explained, is pretty rare, the worst-case scenario often for me is that I'll be expected to repay the money. In some cases I might be hit with a contrition payment, which at many levels might not even equate to the interest that they would have earnt on the stolen wages.
5.47
Witnesses suggested that enforcement mechanisms could be improved by implementing a more focussed strategy and fixed penalties for high risk sectors and repeat offenders, 'on-the-spot' inspections of employers in order to better monitor and detect wage theft, and by establishing a wage theft inspectorate to supplement the FWO's existing role, with powers to inspect records, investigate and press criminal charges where civil actions fail.
Extending penalties
5.48
Some witnesses supported penalty increases for the underpayment of workers, particularly in relation to systemic and repeated instances. They also argued that the likelihood of employers being caught for underpayment is low, and if they do get caught, worse-case scenario is merely repayment of monies owed. They submitted that, while penalty payments may be levied on occasion, they may be so low that it 'might not even equate to the interest that they would have earnt on the stolen wages' and are considered 'the cost of running a business' and a risk worth taking.
Increasing penalties
5.49
ACCR and LUCFR Super, the Financial Services Council (FSC), the NTEU and others supported measures to increase penalties for underpayment of employees, to serve as a deterrent to employers. For example, Ms Gabrielle Gooding, National Assistant Secretary of the NTEU warned that 'I don't think anything other than penalties and substantial back payments and public opprobrium is going to impact the universities' behaviour'.
5.50
However, Ai Group and Housing Industry Australia (HIA) rejected this approach. Ai Group advised that penalty increases would create inconsistencies and unfairness between state and territory and federal penalties, that changes to the system should be evidence based, and it is too soon to gauge the impacts of penalty increases made in 2017. Furthermore, they argued that substantial increases in the number of self-reported underpayments suggests that compliance and enforcement activities are working as intended.
5.51
HIA said that it would support the continued use of voluntary compliance measures, partnerships, and cooperation to improve compliance and change employer behaviours.
5.52
Dr Hardy questioned the value of increased penalties, highlighting that her research has found other approaches to have a greater deterrence effect:
I found that deterrence is, of course, a critical component of enforcement, but larger and harsher penalties do not necessarily deliver greater doses of deterrence in the way that one might expect. Deterrence is about much more than the size of a court ordered sanction. It depends on the risk of detection as well as the swiftness between the time of the contravention and when the punishment is felt. This suggests to me that increasing the perceived risk of detection is more powerful in changing compliance behaviour.
Ability to make additional orders
5.53
The committee heard that provision should be made for additional orders under the Fair Work Act—including those relating to director disqualification, enforcement, banning migrant employment, adverse publicity, and the possibility for additional orders to be made by the FWC—such as Minimum Entitlements Orders and Independent Contractor Status Orders—to provide further flexibility.
5.54
For example, the latter could ensure that certain classes of employees are treated as employees and entitled to protections under the national employment framework, or treated as genuine contractors. The committee was told that this would help provide certainty for workers about their employment status and entitlements, while still providing the FWC with the flexibility to include new and emerging forms of work.
Measures aimed at companies
5.55
A smaller number of submitters suggested that compliance by companies and directors could be improved through increased enforcement action, director disqualification and company deregistration via the Australian Securities and Investments Commission (ASIC). This could occur, for example, where companies use Superannuation Guarantee (SG) payments or wages owed to trade while otherwise insolvent, in relation to the recovery of payments under the FEG and non-payment of debts (including to employees or superannuation funds), or in other instances relating to inadequate financial reporting, or auditing.
5.56
Moreover, the penalty measures could be extended to cover significant instances where companies, directors and/or officers have underpaid employees—particularly if underpayment is criminalised. The UNSW Law Society suggested that, as wage theft is perceived as a competitive strategy by some, underpayment could be included within the scope of anti-competitive conduct under consumer law. They submitted that such measures would drive cultural change and provide access to alternative penalties.
5.57
However, the Australian Institute of Company Directors (AICD) does not favour these approaches, instead it argued for more rigorous enforcement of existing laws.
5.58
The committee heard that improved employment education and scrutiny of applications at the time companies apply for an Australian Business Number (ABN), including a face-to-face interview, a director identification number, and compulsory insurance could be used to limit phoenix activities.
Extending accessorial liability and supply chain measures
5.59
A range of submitters reaffirmed the Migrant Workers' Taskforce recommendation to extend accessorial liability, additionally suggesting that a positive obligation be placed on franchisors to ensure their franchisees comply with workplace laws, that franchisors bear underpayments costs if franchisees cannot, and that accessorial accountability be extended to 'anyone' who causes wage theft to occur or assists in the commitment of wage theft across supply chains. Maurice Blackburn Lawyers submitted:
… there needs to be a more streamlined and direct accountability structure between the company that wants the work done (in this case the hotel) and those who do the work. This accountability structure needs to include responsibility for the health and wellbeing of the workers, and responsibility for ensuring that workers are receiving their full entitlements.
5.60
In contrast, other witnesses, including the Ai Group, the ACCI and HIA, rejected the extension of accessorial liability, arguing that the existing provisions are 'working effectively and as intended', and that existing requirements for knowledge are appropriate. They further asserted that the number of cases successfully brought by the FWO illustrates the effectiveness of the current arrangements, and that any extension would impede productivity and competitiveness, and negatively impact investment in Australia.
5.61
The ACCI also explained that it is too soon to gauge the effects of legislative changes made in 2017, making it clear that:
… [it is] therefore strongly of the view that any further extension of liability without seeing the full effect of previous changes will only further act as a drag on our economy and international competitiveness by tying up resources in administrative oversight, reducing productivity and efficiency instead of achieving compliance objectives.
5.62
Additionally, it advised that the introduction of measures to make lead businesses liable for underpayments in their supply chains 'risks paralysing every contract or every attempt to contract', further observing that businesses are unable to compel honest answers from others, and that businesses do not have the expertise to know the employment obligations of others in their supply chain. The ACCI warned that changes to accessorial liability provisions would result in serious negative implications and costs on business, particularly small companies, forcing them out of business.
5.63
HIA added that 'the complexity of the residential building industry makes any further expansion of liability across the supply change impractical and unworkable'.
Criminalising underpayment of wages
5.64
Some inquiry participants expressed the view that wage theft should be criminalised at the federal level. For example, Per Capita spoke in favour of this approach, saying:
It is about a lack of meaningful penalties for activities like phoenixing but also for endemic wage theft. No-one's arguing that someone who's made a mistake with their payroll and it's a one-off thing—a small business that perhaps genuinely made a misclassification of award mistake—should be held to a criminal standard. But there is a great deal of evidence that this is not a mistaken practice but actually a deliberate practice by significant sectors of employers in industries that already employ very low-paid and insecure workers. So a lack of meaningful penalty imposed by the Fair Work Commission and through legislation means that often employers, particularly larger employers, will weigh up the cost of the relatively small penalty they may pay against the benefits to their profit line of continuing this practice. And that's completely out of whack. The problem is that, if you think, 'I can get away with this. I might get hit with a with a fine that's going to be 10 per cent of my revenue for a month, but I'm saving 20 per cent by underpaying my staff,' then people will continue to do it.
5.65
Underpayment of wages became a criminal offence in Victoria and Queensland in 2020, with a maximum penalty of ten years in prison. When passing the legislation, both jurisdictions signalled the federal regime did not protect workers, nor sufficiently deter underpayment by employers.
5.66
Dr Carina Garland from the Victorian Trades Hall Council spoke to this change:
The need for new laws was due to a failure in our current IR system federally which allowed bosses to build businesses on wage theft. This is a source of national shame.
5.67
Ms Julien Gibson had a more visceral and personal response:
When Victoria introduced legislation criminalising wage theft, I cried. Finally, workers were going to have something solid and strong that couldn't be manipulated or be met with wilful ignorance and poor excuses. Finally, there was hope for my friends and my colleagues.
5.68
The Australian Government indicated its intention to criminalise wage theft in 2019, and commenced consultations which were interrupted by the pandemic. On 9 December 2020, the Australian Government introduced the Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Bill 2020 to Parliament. Amongst other things, the bill would have created a new criminal offence for an employer who dishonestly engaged in a systematic pattern of underpaying one or more employees and overridden similar state and territory laws. However, the proposed amendments relating to criminalisation were removed prior to the bill's passing.
5.69
The MWC, the United Workers Union (UWU), NSW Young Labor, the NUS, Domino's Pizza Enterprises and others supported the introduction of criminal offences at the national level.
5.70
However, other submitters were more cautiously supportive, with the Young Liberals Movement of Australia agreeing that the criminalisation of wage theft could be a greater deterrent against wage theft, but also warning that the laws would only be as effective as their enforcement. It also stressed that criminalisation would potentially add costs and delays, and result in less avenues for dispute resolution for workers.
5.71
The Law Council of Australia (LCA), Dr Clibborn and Dr Hardy advised that criminalising wage theft would, on its own, not improve compliance. Dr Clibborn remarked:
A couple of points to note on criminalising wage theft in particular are that we're not adequately enforcing our existing laws in the civil realm, so I don't expect merely increasing the penalty to do anything, or anything substantive. Added to that, criminal prosecutions are more resource intensive than civil prosecutions, so, if we have the same prosecution and investigation regime in place to support criminal prosecution, then we should not see an increase in compliance as a result.
5.72
Dr Hardy maintained that it is the perception of being caught that is critical, concluding that:
… ultimately our research confirms that the frequency of inspection, combined with strategic use of media and publicity, may be more powerful in fuelling a firm’s perception of risk and foster a greater willingness to commit to compliance in the longer term.
5.73
Restaurant and Catering Australia agreed with this view, explaining that criminalisation is not a silver bullet, and that alternative approaches—such as improved enforcement of existing laws, more education, and business collaboration with regulators—would be more effective.
5.74
In contrast, Ai Group, the ACCI and HIA strongly opposed the criminalisation of wage theft, with Ai Group describing such suggestions as 'extremely harsh and inappropriate'.
5.75
Ai Group further explained that criminalisation would reduce investment and growth, would stop directors and business managers self-disclosing underpayments, and impede constructive remedial action. It warned that, in any case this measure would not deliver back-pay to workers. If criminalisation were to be introduced, Ai Group counselled that it apply only to 'dishonest, deliberate, serious and systematic conduct'. It cautioned:
Exposing an employer to imprisonment for non-payment of a debt to an employee constitutes a regressive development in the system of workplace relations reversing more than a century of modernisation since the abolition of debtors’ prisons in the middle of the nineteenth century.
Criminalising underpayments would represent a major unwarranted change to the workplace relations system that is not in the interests of businesses, employees or the wider community.
5.76
The Franchise Council of Australia (FCA) also expressed its disquiet at proposals to criminalise underpayments, advising that new ownership groups would unfairly be held liable for non-compliance issues that were not identified during pre-sale due diligence processes.
National labour hire registration scheme
5.77
Drawing on recommendations from the Migrant Workers' Taskforce and the experiences of Queensland, South Australia, Victoria, and the Australian Capital Territory (ACT), several witnesses supported the establishment of a national labour hire licensing scheme to address unscrupulous labour hire practices.
5.78
In 2019, the Australian Government signalled its intention to establish a labour registration scheme—as opposed to a licensing scheme—however COVID-19 appears to have impacted its implementation, with little evidence of progress. That said, as recently as 20 March 2022, it was reported that the Australian Government is moving ahead on its plans to introduce a registration scheme, with Agriculture Minister, the Hon David Littleproud MP saying:
'There is a small cohort in agriculture, as there is in every industry, that do the wrong thing that cut corners,' he said.
'Our job is to weed them out and remove them from the industry. And we're doing that with increased regulation on labour-hire companies and increasing the penalties to make sure if they do the wrong thing, we will remove them.'
5.79
Witnesses identified the necessary attributes for such a scheme, including strict licensing standards in relation to workplace and other laws, with compliance or remediation essential to maintaining registration. The Queensland Government expressed reservations about a federal scheme, noting that:
… the Queensland Government is concerned the federal Government’s intention is to introduce a ‘light touch’ registration scheme with limited coverage, when the experience in Queensland demonstrates the benefits of a rigorous licensing scheme with broad coverage of the entire labour hire sector.
5.80
ACCR and LUCFR Super suggested that, at minimum, the scheme cover high-risk industries such as horticulture, meat processing, cleaning and security, and that host companies in those sectors be required to use registered labour hire operators.
Improving recovery of unpaid superannuation guarantee contributions
Aligning pay and superannuation payments
5.81
Overwhelmingly, submitters told the committee that superannuation contributions must be made at the same time as workers are paid. The committee heard that this would not only help employees to see their contributions—and any underpayments—promptly, but it would also help businesses manage their cash flow, and assist the ATO in detecting non- or underpayment of SG contributions.
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Industry Super Australia (ISA) explained:
In almost every case study we've looked at employees who were underpaid super were shocked to learn that, even though it appeared on their payslip, it wasn't actually being paid into their accounts. The ATO likewise has lamented the challenges it faces under this framework—the promise to pay verses the actual payment. More frequent payment of super would allow the ATO to act quicker, make it easier for employees to track their payments and harder for employers to fall behind. It would improve cashflow practices and even the playing field for businesses.
…
There is a real moral hazard that operates here, where the law permits very lengthy periods before the superannuation entitlements need to be paid. It's that gap in the law that, in fact, facilitates and enables this sort of conduct to occur.
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Increasingly, technology facilitates regular payments, and accruing superannuation payments in fact impairs the ability of businesses to get on top of their cash flow situation, merely delaying payments.
5.84
The ISA further suggests that alignment of superannuation and wage payments be introduced in a staged way, with suitable forewarning, as was successfully done for Single Touch Payrol.
Extending the National Employment Standards to super
5.85
A number of witnesses called for the National Employment Standards (NES) to be extended to include superannuation. They speculated that this would both improve the future financial security of workers—women in particular—and, at least under current arrangements, enable the FWO and other parties to pursue claims when workers have not received their full SG contributions. This would allow those claims to be pursued concurrently, as with other industrial entitlements.
… make super payment compliance the eleventh [sic] national employment standard. The national cost to both employees and businesses as a consequence of non-compliance is too great a burden for the broader community to bear.
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The Department of the Treasury (Treasury) informed the committee that it had 'commenced discussions' on including superannuation in the NES, however these consultations had been disrupted by the pandemic. In its response to a question on notice about any detailed discussions, Treasury advised only that it had not put forward any proposals to the Attorney-General's Department.
Other parties to aid recovery
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With recovery action for unpaid SG payments the remit of the ATO, ISA and ACTU noted that they are in favour of enabling not only employees, but other parties such as unions and trustees, to act to recover unpaid contributions on behalf of their members:
Most people would not be aware at the moment that an individual employee actually doesn't have any legal standing to pursue underpayment of superannuation unless it's specifically included in their employment contract or individual contract in particular terms. But in most instances they're powerless; they need to rely on the ATO because of the way the superannuation guarantee charge works.
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Dr Hardy also supported a broader-ranging approach:
So to the extent that super be introduced into the Fair Work Act as, for example, the National Employment Standards, it would be a really important step forward to make it clear that not only the Fair Work Ombudsman has standing to pursue that claim but unions have. That goes back to the comment I made earlier about trying to be as inclusive as possible, trying to enrol as many actors in the process. I think that is a really important reform.
Extending the Fair Entitlements Guarantee to super
5.90
Likewise, some submitters called for SG entitlements to be included in the FEG scheme, particularly given the high rates of unpaid superannuation, the high proportion of insolvencies involving unpaid superannuation, and the relatively low recovery rate to date.
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Treasury explained that the SG Cross-Agency Working Group had recommended against expanding the FEG to include superannuation because of administrative complexity, the significant costs to government, and because the FEG had been designed to cover more immediate entitlements such as wages and leave.
5.92
As explained by Mr Stuart Bonds, schemes such as the FEG are yet another mechanism which enables companies to renege on their obligations to pay employees and place the costs back on taxpayers. By way of example, the CFMEU reported that between 2009 and 2015 taxpayers shelled out over $226 million to workers accessing the FEG because they had not been paid—and that just covered the construction industry.
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The Australian Government's 2017 consultation paper noted that claims and costs under the FEG have increased dramatically, with some employers deliberately structuring their affairs to avoid paying employees when they become insolvent, relying on the FEG. The consultation paper emphasised that 'the costs of these behaviours were also found to be significant'.
Need for ATO to improve enforcement and communication
5.94
As discussed in Chapter 3, the ATO's enforcement is relaxed, its recovery processes are slow, and communication is less than adequate. The ISA highlighted that more could be done by the ATO to improve enforcement:
At the moment the ATO takes quite a permissive approach to the part 7 penalties. In our opening statement we mentioned that about three-quarters of penalties are fully remitted, and we think there's more of a role for penalties to be used as a deterrent. At the moment that doesn't appear to be an approach that the ATO takes. It's a bit of a perverse outcome where the ATO publishes its part 7 penalty practice guide online, which is a bit of a how-to guide for escaping penalties, but at the same time it doesn't, for example, publish its enforcement activities or examples of poor practice that might actually act as a deterrent and reduce instances of unpaid super. So there are a few things that are fairly cost free that the ATO could be doing.
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The committee also heard that the ATO needs improve its communications with both employers and employees, including communicating with them directly and keeping them informed of legislative changes, as well as explaining how matters relating to individual complaints are progressing.
Technology assisted compliance
5.96
A number of witnesses, including the ATO and businesses, recognised that technology developments, and improved data collection through measures including Single Touch Payroll are improving compliance with employer obligations, such as meeting SG contributions and payroll obligations.
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However, other witnesses such as Mine Super, suggested that there is more that could be done to leverage technology and data to improve compliance levels. Pendragon Consultants drew the committee's attention to the challenges faced by digital payroll service providers, admitting that the environment is complex, regulators are not funded to participate in the co-design of systems in order to automate compliance, and 'customers will not pay for compliance: they pay for functionality they require in their business and expect the system to be compliant'.
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Dr van Barneveld spoke to opportunities for the government to improve cross-agency data sharing, and Dr Hardy advocated for the payment of workers via electronic funds transfer (rather than cash, for example) in order to make payments more transparent and traceable.
5.99
The Ai Group argued that improved oversight provided to the ATO by Single Touch Payroll makes further measures aimed at detecting non-compliance unnecessary.
Other regulatory and structural reforms
5.100
Witnesses recommended a range of other regulatory reforms to help reduce unlawful underpayments and improve payment recovery for victims of wage theft, as explained below.
Reduce industrial relations complexity
5.101
Several witnesses advocated for an overhaul of the industrial relations system, including awards and enterprise agreements, to reduce complexity and ambiguity, making it easier for employers to comply and for employees to understand their entitlements. By way of example, the Business Council of Australia submitted:
… [underpayment requires] long-term policy solutions to reduce complexity in the industrial relations system. Unless such solutions are implemented, then errors will continue to happen. The extent of non-compliance could be substantially reduced if appropriate reforms are made to awards and the National Employment Standards (NES) to make them simpler and easier to apply by both employers and employees.
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The Business Council of Australia suggested that complexity be reduced by:
reviewing and simplifying the NES, reducing the number of award pay rates, additional loadings and allowances;
improving job and work descriptions to make it easier to identify which award covers a worker;
addressing conflicts in legislation—especially in relation to superannuation;
redesign of the better off overall test (BOOT) as a global test; and
simplifying the language used.
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The Institute of Certified Bookkeepers went further, recommending a simplified employment relationship, based on a single general class of workers, with standard descriptions and templates, and enhanced by 'definitive comparison and analysis tools' in order to reduce complexity and improve compliance.
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However, not all submitters were convinced of the system's complexity, nor of the need for regulatory simplification, with the NSW Society of Labor Lawyers recommending a range of alternative measures. The UNSW Law Society also noted that it was unconvinced, arguing that employers create much of the complexity themselves through torturous employment arrangements, and that '… it is important to note that the many businesses that blame the Modern Award’s complexity for their underpayment of employees, such as Woolworths, have the resources to employ professional auditors and interpret the Modern Award correctly'.
Tax treatment of repayments
5.105
The committee received varying evidence in relation to the tax treatment of wage and superannuation repayments. The ACCI categorically stated that:
Special tax arrangements should not be made for individuals receiving income from the underpayment of wages. It is important that the underlying principles of the tax system - equity, efficiency, certainty, simplicity and neutrality - are maintained.
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It further explained that existing tax law makes suitable provision for back payments, noting that any increase in tax paid due to a shift to a higher tax bracket 'is likely to be minor'.
5.107
However, the committee also heard that tax treatments should be reviewed and amended to ensure that workers who are paid stolen wages are treated no less favourably than if their entitlements were paid correctly.
Ethical Australian Government procurement
5.108
Ethical government procurement was suggested as a further measure to address underpayment. Witnesses to the inquiry, including Associate Professors Berg and Farbenblum, and the MWC, maintain that Australian Government procurement arrangements should require that companies comply with workplace laws—particularly those relating to payments. They submitted that companies which do not comply should not be awarded government business, arguing that this approach is vital to modelling best practice, and provides leadership and commercial incentives necessary to drive cultural and practical changes, particularly in industries where wage theft is rife,such as cleaning and security.
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Ms Jo Briskey from UWU explained:
… a potential way to address that is to ensure that, when companies—from those who are tendering for contracts through to the entire supply chain—are tendering for government contracts and seeking to have government investment in the work that they do, they should meet standards. And, if there are any instances of breaches of the Fair Work Act or breaches that clearly demonstrate exploitation of workers, that should be noted and should in effect disqualify them from being able to tender for government contracts. We see that as a positive measure in terms of a carrot and stick approach. If they are looking to get government contracts and be able to secure those, they should be able to demonstrate to the public that they are good employers and they treat their workers properly and by the law. If they can't demonstrate that, then they shouldn't be eligible for government contracts.
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NSW Young Labor and the NUS suggested that such measures go further, submitting that any company found guilty of unlawful underpayment of workers should be prohibited from supplying goods or services to the Australian Government for five years.
5.111
The Australian Retailers Association (ARA) agreed with the exclusion of businesses from government tendering where underpayments have been 'deliberate, malicious and systemic', but argued that a broad-brush approach would be wrong. The Association argued that blanket measures may not result in better outcomes where, for example, employers had made a genuine mistake, or already making remediation payments, or where such a policy resulted in the loss of jobs or company closure.
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The ACCI argued for restraint and careful consideration before instituting government procurement provisions, questioning whether there is sufficient evidence to require such a measure, or indeed whether such a measure is justified, as well as how such a measure might be implemented.
5.113
Similarly, Ai Group cautioned that the Australian Government has already implemented appropriate procurement reforms, particularly in relation to the building and construction industry, and that further reforms should not be made without additional evidence that change is required.
Addressing underpayments in the university sector
5.114
Evidence received by the committee suggested that, in general, universities are unwilling—or at best slow—to take action to reduce underpayments and improve the working conditions of staff, making a mockery of platitudes offered by university management.
5.115
Universities, the NTEU and other witnesses proposed a number of measures to address wage theft which are specific to the sector, and in addition to those discussed elsewhere in the chapter, including:
improving access to information about rights—through resourcing on-campus legal support services, especially for international students in relation to workplace rights, as well as employment and taxation law;
fundamental changes to academic staff pay models—to ensure all staff are paid for all of their time at the appropriate level, by simplifying and improving enterprise agreement definitions and improving clarity;
reducing and limiting the proportion of casual staff—including through publicly reported benchmarks, linked to funding;
improving representation of casual workers in university decision-making, and otherwise empowering casual workers to act together;
labour laws compliance reporting—that universities receiving federal funding be required to demonstrate historical and ongoing compliance with core labour standards, including rates of pay. Ms Gabrielle Gooding from the NTEU stated 'we think it's important that the federal government not support wage theft by funding those who are engaging in it';
improving data collection—in particular requiring that universities report on both FTE and headcount for staff engaged on a casual and fixed term basis, as well as gender, and conversion rates, in order to get a more accurate view of the extent of insecure work in universities and potential impacts on sector sustainability and education quality; and
increasing public funding for universities—to better enable universities to pay staff appropriately, in addition to meeting their other obligations.
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The Australian Government could also consider integrating industrial relations reporting and funding into the Higher Education Standards Framework administered by the Tertiary Education Quality and Standards Agency (TEQSA). The Framework documents registration requirements for higher education providers, to enable them to operate in Australia. There is scope for existing standards to be updated to include, for example, standards relating to appropriate payment of staff and related governance mechanisms under the Teaching, Institutional Quality Assurance, and Governance and Accountability domains.
5.117
Professor Heywood, Vice-Chancellor of the University of New England, spoke at length about the importance of defining the purpose of casual staff in the academic context, and then defining the work expectation. Professor Heywood agreed that definitions need to be clearer and more explicit.
5.118
The committee heard that Professor Heywood is aware of and fully supports the development of permanent employment targets, linked with reporting and funding, to reduce casualisation. The University of New England has already undertaken measures to support the conversion of casual staff.
5.119
While Monash University has not set targets, it noted its commitment to taking active steps to reduce casualisation and improve job security, as well as addressing other sources of underpayment.
5.120
However, the Australian Higher Education Industrial Association (AHEIA) thought that moves to improve reporting in the higher education sector did not have 'proper foundation'.
5.121
Professor Ian Jacobs, Vice-Chancellor of the University of New South Wales, supported the recommendation to improve reporting for federally funded universities and spoke in support of funding increases to universities, through a variety of sources including government, the private sector, philanthropy, and international students.