Industry friends with “other benefits”:
AiG, BCA and AMMA on the criminalisation of wage theft
When my colleagues ask ASX companies why they remain loyal, full paying members of various industry associations that lobby against companies’ own interests on climate and energy issues, many of these companies explain that they get “other benefits” from membership.
Lobbying on industrial relations and tax are two of these “other benefits”.
In a previous post, Who wants what from Porter’s ‘IR review’, we described how industry groups are lobbying the government on union-busting bills, definitions of ‘casuals’, enterprise agreement reform, adverse action reform, unfair dismissal laws, and worker entitlement funds.
Today, we take a look at how industry groups are responding to Porter’s recent discussion paper: Improving protections of employees’ wages and entitlements: Strengthening penalties for non-compliance. The discussion paper considers one of the key recommendations of the Migrant Worker Taskforce (MWT): the introduction of criminal sanctions for the most serious forms of exploitative workplace conduct — commonly referred to as “wage theft”.
The MWT was set up to explore the exploitation of migrant workers in response to the 7–Eleven and Caltex underpayment scandals. With significant numbers of their members under investigation for wage theft, it is unsurprising that industry groups are resisting the introduction of criminal penalties, or so narrowing the scope of the legislation, so as to make it ineffective.
Australian Industry Group (AiGroup)
The Australian Industry Group’s submission “strongly opposes the introduction of criminal penalties for wage underpayments”. Speaking to the SMH, Chief Executive Innes Wilcox highlighted recent changes to enforceable penalties as a justification for not introducing criminal penalties.
AiG are also strongly against the use of the term “wage theft”, and say it risks wrongly labelling bosses who have inadvertently or unintentionally failed to properly pay staff. In their submission, AiG’s arguments against “wage theft” and “criminal sanctions” took a somewhat esoteric turn. AiG submits that “theft” is associated with the taking of a “thing”, and that as there is no “object” that is stolen when underpayments occur, the introduction of “wage theft” would “disturb an existing legal framework by extending the concept of ‘theft’ beyond its current definition”:
To break down this necessary distinction between the civil and criminal legal systems would be a retrograde measure, returning the civil law system to a bygone era where a party could be arrested and imprisoned for failure to pay a debt. […] 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.
Finally, in a brief moment of ‘won’t someone think of the workers’, AiG argue that criminal sanctions would serve no purpose as they would not assist employees in getting back pay for unpaid wages.
Business Council of Australia (BCA)
The BCA states that they support the introduction of criminal sanctions for the “most serious breaches” of workplace law.
The BCA does not go into detail about how FWO would determine breaches that are both serious and intentional. Instead, it criticises the FWO for adopting “an inflexible policy in dealing with non-intentional breaches” which “has resulted in disproportionate remedies being applied to companies who identify their own breaches and self-report, as well as discouraging other companies from self-reporting when such breaches are discovered.”
It then argues that the FWO should be given additional discretion to determine penalties, arguing that in cases of unintentional underpayments companies should only be required to repay workers their entitlements. This discretion could be through the creation of a “safe harbour”, which would establish a situation akin to a permanent amnesty whereby companies could “rectify underpayments in a timely manner without the threat of sanction”.
In arguing for discretion, the BCA also puts forward the argument — shared by many of its breaching members — that the complexity of the industrial relations system is to blame for wage theft. They conveniently ignore the reduction in complexity, which saw a reduction in industrial instruments from 1500 to 121.
Australian Mining and Metals Association (AMMA)
AMMA has not responded to Porter’s discussion paper. However, it has previously criticised the idea of criminalising wage theft.
In response to the Migrant Worker Taskforce’s recommendation for the introduction of criminal sanctions, AMMA’s acting CEO Tara Diamond said:
Further, criminal charges would be counter-productive to the efficient recovery of underpaid wages for affected workers. […] We don’t believe introducing criminal sanctions into Australia’s workplace laws is the right answer, however if the government believes this path would restore that lost public confidence, limiting its application to ‘only the most serious and egregious cases’ would be critically important.
“Admission is not absolution” — ASX companies in the spotlight
A number of AiG, AMMA and BCA members have been publicly associated with “wage theft” in the last few years, including Qantas, Woolworths, Wesfarmers and its hardware subsidiary Bunnings, and Caltex. According to the FWO, numerous other large corporations have self-reported to FWO, however these are yet to be made public.
In FY19, the Fair Work Ombudsman (FWO) recouped $40 million in wage underpayments by 18,000 workers. This is only a fraction of estimated underpayments in Australia.
On the 30 October 2019, Woolworths Ltd. admitted it had underpaid thousands of workers up to $300 million due to inadequate “individual salary settings” going back to 2010. It is the highest figure for underpayments in a string of high profile underpayment scandals. This latest scandal led the Fair Work Ombudsman Sandra Parker to state that “admission is not absolution”, and that:
the non-compliance identified within many of these companies is caused by ineffective governance combined with complacency and carelessness toward employee entitlements.
The numerous wage theft scandals in recent years span the gamut of intentional and dishonest underpayments to reckless complacency bordering on negligence. The proper payment of employee entitlements cannot be separated from broader corporate governance. If employers are not meeting these obligations questions must be asked about their broader due diligence processes in all aspects of their business.
