Increased Penalties and Liability for Underpayment of Wages
A Bill, introduced into Federal Parliament on 1 March 2017, seeks to increase the penalties for wage theft, in particular the 7-Eleven “cashback” scam that surfaced in the Fair Work Ombudsman’s April 2016 investigation.
The Bill, if passed, will introduce tough new laws expanding corporate and franchisor liability and increasing the civil penalties attached to underpayment offences.
The proposed changes include a “serious contravention” offence which will carry heavier fines where the conduct was “deliberate” and “part of a systematic pattern of conduct”. This means looking at the number of contraventions, the period during which they occurred, the number of employees affected and whether proper records were kept including payslips. A court, however, is not limited to these factors and can look at anything it considers necessary to determine whether the contraventions were systematic.
Body corporates will have acted deliberately if they “expressly, tacitly or impliedly authorised the contravention”.
The fines for a serious contravention are ten times that of a standard contravention of the act. This means that franchisors and other corporations could be liable for up to $540,000 per offence while individuals are liable for up to $100,800 per offence.
Franchisor and Holding Company Liability
Franchisors and Holding Companies will be liable if this bill is passed for the conduct of their franchisees and subsidiaries if they “knew or could reasonably be expected to have known that the contravention… would occur”. This will apply even if the conduct is only of a similar nature and not identical to that known by the franchisor / holding company.
Whilst this places significant obligations on franchisors and holding companies, this vicarious liability will not apply if the franchisor / holding company was taking reasonable steps to prevent the contravention from taking place. Furthermore, if the franchisor / holding company pays money owed to an employee, they may recover this money from the offending franchisee.
The cashback scam that involved forcing workers to give their employers part of their wages to make the records of the employer show its workers were receiving the correct wage will now be specifically made illegal.
An employer will be prohibited from directly or indirectly deducting money from their wages or forcing an employee to spend their money if the requirement is “unreasonable in the circumstances” and the payment is “directly or indirectly for the benefit of the employer or a party related to the employer”.
This prohibition will override any Modern Award, Enterprise Agreement or Contract of Employment that seeks to permit such conduct.
If any employees are under the age of 18, regardless of the reasonableness of the request, their employer cannot direct them to spend their money in any way unless their parent or guardian have agreed in writing.
Message for Employers
This Bill was introduced by the Turnbull Government but is unlikely to be contentious and it will likely have the support of Labor.
Therefore, all employers should ensure that their staff are being paid the appropriate rate and if they are a franchisor or holding company, they should ensure that their franchisees and subsidiaries are also compliant.
If you are concerned about the way you have been paying wages, we recommend that you seek legal advice immediately as failing to resolve the issue can leave employers liable for significant penalties and bad publicity.