Wage theft: The Fair Work Ombudsman and you.

Underpayment is an ongoing and increasingly commonplace issue in Australia.

That having been said, in Australia there is a complex set of employment law legislation on a Commonwealth level, with some variance from State to State as well as over 100 employment awards. In addition to the assorted employment awards, employees may be covered by an enterprise agreement or another form of registered agreement, in which case the Awards don’t apply. However, this complex web of legislative obligations, agreements and awards can be difficult to navigate and not all instances of underpayment are intentional. Unfortunately for Australian employers, this opaqueness does not absolve them from understanding their obligations.

A key aspect of this issue is, that as a general rule, the topic of underpayment is not particularly well known, meaning that some employers will inadvertently underpay their employees and that some employees might not necessarily be sufficiently in the know to bring up the fact that they are being underpaid. 

An Employer’s Obligations to self-report underpayments

Back in 2021 a spokesperson for the Fair Work Ombudsman, involved in the investigation into Crown Resorts stated, 

"We expect any employers that identify non-compliance to report to the FWO and fully cooperate with our investigation to ensure that employees are quickly repaid any outstanding entitlements." And that "Any workers with concerns about their pay should contact us directly for assistance."

As an employer you may not be aware of your obligation to self-report any mistakes you may have made in relation to underpayment.  to the Fair Work Ombudsman (FWO) and to take steps to rectify the situation. An employer must work out for how long the employee was underpaid, determine how much they were paid and how much they are entitled to and then from these figures calculate how much the employee has been underpaid. Your next obligation as an employer is to discuss the state of the underpayment with the affected employee and confirm how the back pay will be managed.

Failure to notify the FWO of underpayment can result in the FWO starting an investigation or inquiry, even if the employees in question have already been back paid. 

Wage Theft

Wage theft is the illegal practice of withholding wages from an employee. As of the 1st of July 2021, wage theft was made illegal in Victoria. The key difference between underpayment and wage theft according to the Victorian Wage Theft Bill is that wage theft requires dishonest intent, that the employer was deliberately withholding or stealing form the employee. The Australian Federal Government and the other State Governments have also been considering the prospects of criminalising wage theft and the underpayment of staff.

Fair Work Ombudsman under pressure due to COVID-19

The FWO is currently stretched thin investigating underpayment in at least seventy large corporations, a situation has only been exacerbated by the COVID-19 Pandemic which saw a spike in inquiries to the FWO. Additionally, the Fair Work Ombudsman affirmed that supporting workplaces through the pandemic and the recovery is the FWO's the main priority for 2021. However, they also acknowledge that businesses are struggling and there is the potential for the exploitation of vulnerable workers. In 2020 the Star Entertainment Group self-reported to the FWO when they discovered that they had inadvertently been underpaying over 2,000 employees over a period of six years. The estimated combined value of the outstanding underpayments is approximately $13 million.

George Calombaris’ Underpayment of his employees between 2011 and 2018

One of the more iconic and divisive instances of underpayment in recent years is undoubtedly the massive multi-stage unravelling of George Colambaris’ restaurant empire which began as a result of the restaurateur inadvertently underpaying his employees.

In 2017, Columbaris’ MAdE Establishment self-reported that they had inadvertently underpaid 162 of its employees by $2.6 million. The famed Master Chef judge then took steps to work with Fair Work Australia to lay the issue to rest.

However, by 2019, it became apparent that the underpayment issues were not finalised but that the sheer scope of the underpayments was considerably broader than had previously been believed. The Fair Work Ombudsman’s investigation into MAdE Establishment in 2019 brought to light that 515 of their employees were underpaid a cumulative total of $7.8 million over the six-year period.

In addition to the $7.8 million in back payments, the Court Enforceable Undertaking imposed a $200,000 contrition payment upon MAdE Establishment as well as requiring the organisation to fund external auditors to check pay and conditions for MAdE Establishment’s employees from 2019 till 2022.

As we said earlier, underpayment is an increasingly common problem for employers and employees, however it has shifted from predominantly occurring in small-to-medium businesses, such as George Calombaris’ MAdE Establishment, to running rampant in much larger corporations such as Woolworths, Qantas, Crown Resorts, and the Star Entertainment Group to name a few.

What to do:

To this end it is vital that employers must respect employee entitlements under applicable workplace laws. However, determining which Award applies can be difficult especially when employing staff in wide spread of roles, as the appropriate Award can vary from role to role.

Underpayments are an ongoing and increasingly commonplace issue in Australia and navigating the legislative quagmire that is employment law can hinder an employer’s ability to limit and prevent underpayment from occurring in their organization. For the most part, underpayment is accidental, employers aren’t out to get their employees, rather payroll errors and confusion regarding which Award applies contribute to the prevalence of underpayment in Australia. This is why it is so important to be aware of what you need to do if you have inadvertently underpaid your employees.

What to do?

• If you discover underpayments within your organisation, report it to the Fair Work Ombudsman immediately

• Seek legal and financial advice

• Take steps to assess the scope of the underpayment

• Pay the underpaid employees their backpay.

Voice Lawyers would be delighted to assist your business to navigate the complexities arising from any employment law issues you may be having or just to answer your employment law queries.

This article is general in nature and is not legal advice. If you need help with an employment law matter, Voice Lawyers is here for you. 

Speak to us at Voice Lawyers for advice and representation in your Employment Law matter. Please contact us on 02 9261 1954, email us at voice@voicelawyers.com or use the link on our website to book a consultation.