Employers could face jail time over wage theft

By Nick Hall | 25 Jul 2019 View comments

The Prime Minister has issued a stern warning to employers who exploit workers, in the wake of ongoing wage theft reports.

Scott Morrison on Wednesday revealed that employers engaging in misconduct may face criminal penalties.

“Right now, the Attorney-General is drafting laws to deal with criminalising worker exploitation,” Prime Minister Morrison confirmed during parliamentary question time.

The renewed focus on employee welfare follows a string of recent media reports that revealed an alarming number of employers weren’t playing fair.

In the news

In the last week, celebrity chefs George Calombaris and Neil Perry have both become embroiled in underpayment scandals.

Colambaris’ hospitality group MAdE was revealed to have underpaid staff more than $7.8m in wages. The ensuing fallout saw the Masterchef judge cop a hefty fine and walk away from the television spotlight.

Similarly, Rockpool Dining tycoon, Neil Perry is facing allegations of wage theft and exploitation. According to Maurice Blackburn principal Josh Bornstein, the hospitality group has committed several serious contraventions of the award and Fair Work Act.

“This is another Dickensian example of wage theft and exploitation of vulnerable workers that is all too common in the hospitality industry,” Bornstein said in a statement.

“Rockpool is no bit player. It’s a highly profitable business empire which has been cheating.”

Wage theft fallout

While franchise businesses, particularly in the fast-food and dining industry are feeling pressure to bolster their compliance practices, not all are convinced the government’s proposal will improve conditions.

Michael Wilkinson, senior employment relations adviser at Employsure labelled the announcement as a scare tactic.

“It doesn’t make sense — why create fear in the business community?” he said.

Wilkinson acknowledged that wage theft was an undeniable problem in Australia, however advocated for further investigation into the causes, rather than the implementation of hefty penalties.

“Before we label an entire section of Australia’s economy as bosses intent on ripping off their staff, can we perhaps examine a deeper reason why employers might be struggling to pay their staff correctly?” he said.

“It’s no secret that we have one of the most complex workplace relations systems in the world, and hospitality employers are especially prone to making wage errors. Between casuals, part-time and full-time workers, along with rising minimum wages, various penalty rates and Award entitlements, it’s a merry-go-round and they can find it hard to navigate.

Watchdog targeting

The latest wage theft reports follow a concerning trend in the food industry, revealing that even industry leaders are not exempt from exploitation.

Over the past 12 months, franchise chains, 7-Eleven, Chatime and Domino’s have been accused of engaging in wage theft. In February, the Australian Competition and Consumer Commission (ACCC) announced a targeted compliance review of franchised food businesses.

“The ACCC receives more franchising code related reports from café, restaurant and take-away food franchisees than any other sector, and for this reason franchisors operating in this sector will be the target of our next round of checks” deputy chair Mick Keogh said.

The watchdog, alongside The Fair Work Ombudsman is coming down hard on employers who exploit workers, with Prime Minister Morrison’s announcement adding further pressure for operators.

Wilkinson suggested that wage theft as a premediated measure must be stamped out, however the proposed regulations do not account for honest errors.

“While systematic underpayment is a serious matter, it’s honest errors and a lack of understanding of entitlements that puts smaller hospitality businesses at risk,” Wilkinson said.

“Yet ignorance is not an excuse in the eyes of the FWO, which will pursue cases of underpayment in an attempt to reclaim any unpaid wages. Thirty per cent of calls from our clients in this sector will relate to basic employee entitlements, so it’s clearly an area where they struggle.”

Wilkinson implored operators form all levels of employment to commit to compliance. With the Morrison government calling for further penalties, all franchisees and franchisors should take note.

“It’s incredibly easy for employees to tip-off and report cases of underpayment. With the attention being placed on the sector, it’s a wake-up call for employers to be confident that they are compliant with the entitlements of their staff.”

Additional reporting: AAP