Systemic, sustained and shameful
Wage theft is a debilitating issue not just for the individuals affected, but in many cases, particularly with superannuation theft, detrimental to the economy. Dr Carina Garland from the Victorian Trade Hall Council, explained to the committee that the need for change and:
'… the need for new laws was due to a failure in our current IR [industrial relations] system federally which allowed bosses to build businesses on wage theft. This is a source of national shame.'
As a result of underpayments, future generations of workers will have to foot the bill for 'missing' savings through extra taxes to supplement government pensions that should have been covered by employer superannuation guarantee contributions.
The committee is highly supportive of the findings and recommendations of the Senate Select Committee on Job Security and the Senate Select Committee on Temporary Migration. In addressing some of the outstanding issues of wage theft, the committee is cognisant that the Australian Government attempted to deal with some of the scourge of wage theft through the Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Bill 2020. However, this proved to be a missed opportunity.
The committee believes that central to providing a fair and equitable workplace is the enshrining of adequate legislative instruments to 'back-up' processes that assist and protect employees and their entitlements at the same time acting as a deterrent to would-be offenders. In addition to appropriate legislative protection and recourse through the Fair Work Act, there is the need for adequate and fully resourced compliance and enforcement of the National Employment Standards, and protection of employees’ entitlements.
Penalties for wage theft
The committee found that systemic wage theft is often a deliberate decision of businesses that participate in a race to the bottom to bring down wages and increase profit.
A number of witnesses, including the Australian Council of Trade Unions (ACTU), United Workers Union (UWU) and Shop, Distributive and Allied Employees Association (SDA) have recommended to the committee the need for improved penalties and the criminalisation of wage theft. The Young Workers Centre additionally recommended that all remuneration, including superannuation, be included in laws that relate to wage theft.
The committee frequently heard throughout the inquiry that employers which engage in wage theft derive an unfair competitive advantage over compliant employers. It was also noted that the underpayment of wages and superannuation has been used to by businesses to improve their cashflow, often in cases where they would otherwise be insolvent.
Evidence was also heard throughout the inquiry that current wage theft laws do not accurately capture parties that participate in or create environments of wage theft. This includes where a contract is awarded at a cost that is not sufficient to pay correct wages.
The committee recommends that the Australian Government prioritise amendments to the Fair Work Act 2009 to criminalise wage theft in Australia, and that such legislation:
apply to the theft of all employee remuneration (including loadings, penalty rates, overtime, leave, allowances and superannuation guarantee);
include penalties for the falsification of records; and
is drafted in consultation with the states to ensure Commonwealth wage theft laws do not weaken existing state legislation.
The committee recommends that the Australian Government amend the Fair Work Act 2009 to:
increase civil penalties for wage theft;
make it an offence for employers to advertise employment with a rate of pay less than the national minimum wage; and
capture all parties and individuals that directly participate in wage theft, including those who knowingly or recklessly create an environment of wage theft (including franchisors, advisors, head contractors and other third-party participants in supply chains).
The committee recommends that the Australian Government consider tasking the Australian Competition and Consumer Commission to bring forward a legislative amendment to the Competition and Consumer Act 2010 to incorporate wage theft as an anti-competitive practice.
The committee recommends that the Australian Securities and Investments Commission improve enforcement action and director disqualifications from managing a company, where companies use Superannuation Guarantee payments or wages owed to trade while otherwise insolvent.
Pursuit of wage theft claims
The committee found that the current legislative and regulatory framework is inadequate for pursuing wage and superannuation theft.
A wide range of witnesses told the committee about the difficulties encountered by witnesses seeking redress for underpayments, with a number of witnesses proposing recommendations to the committee to make processes for pursuing wage claims more affordable and accessible for workers. In particular, the ACTU called for the establishment of an industrial court, co-located with the Fair Work Commission (FWC), that allows for a claim initiated in the FWC to be resolved in the industrial court.
The process of pursuing wage and super theft is disconnected, inaccessible and daunting for workers. Many witnesses called for a process in which wages and super can be pursued together in an accessible, simple, and affordable way that encourages more workers to seek justice.
Witnesses also noted that the payment of lump sums when wage theft claims are finalised can financially disadvantage workers due to the taxation treatment of the repayment.
The committee recommends that the Australian Government establish a small claims tribunal, ideally co-located with the Fair Work Commission, to create a simple, affordable, accessible, and efficient process for employees to pursue wage theft, including Superannuation Guarantee non-compliance.
The committee recommends that the Australian Government, through the Australian Taxation Office, review the taxation treatment of wages repaid to employees following incidents of wage theft to ensure they are treated no less favourably than if wages were paid when they were due.
Investigation of wage theft
The committee believes that workers and unions should be the driving force in ending wage theft. For this to be achieved, workers need to be empowered and protected to speak out against wage theft and unions should be better utilised to investigate potential wage theft.
The committee heard from a number of witnesses who recommended a need to return the ability of unions, on behalf of employees, to inspect employees' records, as a tool for monitoring and investigating wage theft.
Witnesses also noted that since these powers had been removed, incidents of wage theft have increased. Evidence to the committee, including from academics and the National Foundation for Australian Women (NFAW), suggested that investigations would be improved, and wage theft deterred by allowing 'right of entry' permit holders to inspect employee records. The committee noted that concerns were also raised regarding the failure of employers to produce accurate and timely records to 'right of entry' permit holders, as well as the lack of penalty for providing false and misleading documents.
The committee recommends that the Australian Government review whether employee representatives that hold 'right of entry' permits can be better utilised to inspect and investigate potential underpayments across workplaces.
The committee recommends that the Australian Government amend the Fair Work Act 2009 to include provisions relating to the production of documents to permit holders, to:
introduce a penalty for individuals or entities that provide false or misleading documents to a permit holder exercising right of entry; and
expand section 557C to apply to the failure to produce accurate documents to a permit holder exercising right of entry.
The committee believes that superannuation must be treated the same as wages, particularly by employers.
The committee received evidence that the Australian Taxation Office (ATO) takes a permissive approach to superannuation theft. The ATO, the committee was informed, do not properly penalise non-compliant employers and repeat offenders, furthermore, the ATO does not communicate with employees that have a superannuation theft claim, and it does not have accurate visibility of the extent of unpaid superannuation, despite the introduction of Single Touch Payroll, which theoretically makes it more visible.
The committee heard evidence from workers, unions, and academics about the difficulty in pursuing unpaid super claims through the ATO, including the lack of standing for employees, unions and superannuation funds, and the lack of information shared between the ATO and affected employees.
While it was suggested that pursuing unpaid superannuation would be made easier by shifting the process to the FWC or alternative process, the committee heard other proposals from Industry Super Australia (ISA), unions and workers about ways the ATO could improve its activities.
The committee recommends that the Australian Government consider bringing forward amendments to the Superannuation Guarantee (Administration) Act 1992 to:
require Superannuation Guarantee payments to be aligned with the payment of wages;
require Superannuation Guarantee payments to be made on every dollar earned to achieve simplicity and ease of compliance; and
consider an incremental implementation strategy, similar to that used for the rollout of Single Touch Payroll, to ensure small businesses are adequately prepared for changes to the timing of Superannuation Guarantee payments.
The committee acknowledges the assistance that the Fair Entitlements Guarantee (FEG) provides employees who are faced with no entitlements, particularly superannuation when businesses do not pay what they owe and then go into liquidation, with limited likelihood of receiving these outstanding payments.
Compensation schemes of last resort, such as the FEG provide some assistance to those employees who have had their rightful entitlements stolen. However, ultimately the need is for adequate legislation to ensure that, firstly, payments are made on time and, secondly, that employers that do not pay the correct entitlements face harsher penalties. Reliance on such compensation schemes entrenches the ability for white collar crime to persist because ultimately some else will pay—the taxpayer.
The committee believes that the absence of superannuation in the FEG is an oversight which needs to be amended.
The committee recommends that the Australian Government include superannuation in the National Employment Standards.
The committee recommends that the Australian government consider including superannuation in the Fair Entitlements Guarantee payments.
The committee recommends that the Australian Taxation Office improve its communication with individuals to keep them promptly and fully informed of the progress and outcomes regarding their Superannuation Guarantee non-compliance cases, including:
that before entering into a payment plan to recover Superannuation Guarantee payments from a non-compliant employer, the Australian Taxation Office be required to notify the affected employee and gain their consent to the course of action; and
that in determining a reasonable payment plan to recover Superannuation Guarantee payments from a non-compliant employer, the Australian Taxation Office must give primary consideration to the loss of retirement savings suffered by the employee.
The committee recommends that the Australian Government review all current compliance and recovery activities related to unpaid Superannuation Guarantee contributions, including:
determining which cases should remain with the Australian Taxation Office, and which ones could be transferred to, or shared with, the Fair Work Ombudsman or an alternative body;
directing the Fair Work Ombudsman to begin receiving and acting on Superannuation Guarantee non-payment complaints where appropriate, rather than simply referring the affected employees to the Australian Taxation Office;
reviewing the Superannuation Guarantee contribution regime and its management by the Australian Taxation Office to ascertain whether it is adequately deterring underpayments and recovering unpaid Superannuation Guarantee entitlements; and
improving proactive Superannuation Guarantee initiatives including strengthening and increasing penalties for deliberate and repeated acts of non-compliance, the inclusion of random audits, and the publication of enforcement activities in relation to Superannuation Guarantee payments.
The committee recommends that the Australian Government consider legislative options to give employees, or other parties acting on their behalf such as unions, superannuation funds, and legal representatives greater standing to assist in the recovery of unpaid superannuation.
The committee heard from many witnesses who stressed the impact of wage theft for migrant workers, in line with findings in both the job security and temporary migration committee inquiries.
The Migrant Workers Centre (MWC) made recommendations to the committee which echoed these inquiries regarding protections for migrant workers that are pursuing exploitation and wage theft complaints.
The committee notes that the Migrant Workers’ Taskforce report recommended the extension of the Fair Entitlements Guarantee program to temporary migrant workers, which was also reiterated in this inquiry by the MWC.
Building on the recommendations of the Migrant Workers’ Taskforce report, which the Australian Government has broadly agreed to, the committee makes the following recommendations.
The committee recommends that the Australian Government, as a priority:
extend the Fair Entitlements Guarantee to all employees, including those on temporary visas, building on recommendation 13 of the Migrant Workers' Taskforce report; and
implement a National Labour Hire Licensing Scheme, building on recommendation 14 of the Migrant Workers' Taskforce report. The National Labour Hire Licensing Scheme should build on existing frameworks, such as those schemes operating in Queensland and Victoria, to provide a nationally consistent framework.
The committee recommends that the Australian Government explore reform to visa laws to allow migrant workers who have been exploited or underpaid to remain in Australia until the relevant legal processes for recovery of lost wages or conditions is finalised.
The committee recommends that a formal, and legally binding firewall be established between the Fair Work Ombudsman and the Department of Home Affairs to protect whistle-blowers and temporary visa holders that report exploitation or wage theft to the Fair Work Ombudsman and extend protection to exploitation and wage theft claims progressed through the courts.
Australian Government procurement
The committee received recommendations from a number of witnesses about ways in which the Australian Government can set the standard across its own workforce, particularly in government procurement processes, to prevent wage theft and ensure that taxpayer money is not used to tacitly endorse the underpayment of wages.
The committee believes that the Australian Government should be a model employer by ensuring that wage theft does not occur in its own workforce.
The committee recommends that the Australian Government act as a model procurer by ensuring that:
government procurement powers are being used to support businesses that engage in fair, equitable, ethical and sustainable practices, including demonstrated compliance with labour laws; and
wage theft does not occur within its own workforce, including in government funded sectors.
As mentioned at the commencement of this chapter, the Senate Select Committees on Job Security and Temporary Migration have made findings and recommendations relevant to this inquiry, and evidence from those inquiries has been reflected throughout this report, particularly in relation to migrant workers and the interaction between insecure work and wage theft.
Throughout the inquiry the committee heard that employees are often too scared to come forward and report wage theft due to fear of repercussions, and that increased protections for employees are necessary to address wage theft and exploitation.
As such, the committee endorses the recommendations made by both the Senate Select Committee on Job Security and the Senate Select Committee on Temporary Migration.
The committee recommends that the Australian Government improve protections for employees who engage in lawful activity to prevent wage theft, including joining a union, pursuing underpayments through established processes, publicly speaking out against poor workplace practices, exercising workplace rights, and engaging in industrial activity.
Senator Anthony Chisholm
Labor Senator for Queensland