Wage Theft (Vic)
Wage theft is the underpayment of wages or entitlements to an employee by an employer. It can include paying less than the mandated minimum wage, not making required superannuation contributions, and withholding entitlements such as leave and penalty rates.
Wage theft as an offence
In June 2020, Victoria passed the Wage Theft Act 2020, becoming the first Australian state to pass laws that criminalise wage theft.
The Act created criminal offences in relation to employee entitlements, and established the Wage Inspectorate of Victoria as an authority to investigate wage theft and monitor compliance with certain workplace laws.
It was introduced in response to high-profile underpayment cases, with the State Government declaring civil penalties available under the Fair Work Act 2009, prosecuted by the Fair Work Ombudsman, were not a sufficient deterrent to wage theft.
The Wage Theft Act 2020 is to come into effect on a date yet to be announced, but no later than 1 July 2021.
It refers to wage theft as “employee entitlement offences”. Dishonesty is an element common to the offences and is determined “according to the standards of a reasonable person”. This means there is an objective test for deliberate or reckless conduct, distinct from the standard test applied for a general theft offence. Employee entitlements encompass wages, allowances, annual leave, long service leave, meal breaks and superannuation.
Section 6 states an employer must not dishonestly withhold all or part of an employee entitlement, or permit another person to do. Section 7 states an employer must not falsify an employee entitlement record, or permit another person to do so. Section 8 states an employer must not fail to keep such a record, or permit another person to fail to keep a record. The penalty for an offence under these sections is a fine of up to $198,264 for an individual, or $991,320 for company, and up to 10 years’ jail.
The Crimes Act 1958 extends liability for wage theft to others complicit in the commission of offences.
The inspectorate’s functions include:
- to inform and educate people about the Act;
- to promote, monitor and enforce compliance with the Act;
- to investigate offences and bring proceedings.
Inspectorate officers have the power to enter premises, search and seize property related to a suspected offence. Hindering or obstructing an inspector, or giving false or misleading information to an inspector, is considered an offence.
The inspectorate’s focus areas include:
- public interest in investigating;
- exploitation of vulnerable workers;
- high-risk industries;
- deliberate or reckless con-compliance;
- mediation attempts;
- availability and reliability of evidence.
In response to offences, the inspectorate can:
- issue a breach notice that sets out the offence and remedial action required;
- issue formal warnings for minor breaches;
- advise workers to recover outstanding long service leave entitlements through the Magistrates Court;
- accept an undertaking from an employer as an alternative to prosecution;
- where serious non-compliance is found, prosecute the offence in court.
The Act may apply beyond Victoria, where businesses have employees performing services in Victoria.
Defence to wage theft
An employer will have a defence to wage theft if it can prove due diligence was performed by taking reasonable steps to prevent the conduct, such as implementing processes designed to detect anomalies in payroll duties.
Recent prosecutions by the Fair Work Ombudsman in Victoria include:
- In 2019, a Melbourne plumber was fined $151,200 for underpaying a young worker and providing falsified documents. The 22-year-old was underpaid for six weeks work after being paid as a third-year apprentice despite the company not signing the employee to an apprenticeship. The employee was underpaid minimum rates for ordinary hours, overtime, allowances, leave and termination payments.
- In 2017, the company of high-profile chef George Calombaris was found to have underpaid more than 500 restaurant employees a total of $7.8 million. After back-paying the employees, Calombaris made a $200,000 “contrition payment” under an enforceable undertaking.
- In 2017, the operator of a café in Melbourne’s Crown Casino was fined $257,000 after underpaying 54 workers. The director was fined $40,000 and the company $217,000. The company underpaid employees a combined $73,347 through using flat rates which cut entitlements including minimum rates for ordinary hours, overtime rates, casual loadings and penalty rates.
- In 2015, a Melbourne travel agency was fined more than $228,000 after underpaying a vulnerable migrant employee $19,567 over eight months. The employee had been paid between $9 and $11 an hour.
- In 2011, a Melbourne fruit and vegetable retailer entered an enforceable undertaking after the regulator found the company had inadvertently underpaid 265 workers over two years. The employer owed more than $544,200 in superannuation, payroll tax and workers’ compensation payments, with the largest individual underpayment at $12,697.
For advice or representation on any legal matter, please contact Armstrong Legal.