What Is Wage Theft?

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You’ve probably heard the term ‘wage theft’ coupled with talk of tougher sanctions and criminalisation for employers who underpay their employees.

Put simply, wage theft is the underpayment of employees. This often occurs through employers not paying their staff correct wages, not adhering to their staff’s Modern Award, and not paying correct entitlements (such as super).

In Australia, we have really complex laws around payment, and compliance costs and labour costs are high. So it can be easy for employers to make mistakes.

However, wage theft disproportionately affects society’s most vulnerable. Casual workers and foreign workers without support systems and little understanding of their rights in Australia are extremely susceptible.

Wage theft is also really widespread, with PwC estimating 13% of Australian workers are being underpaid—adding up to $1.35 billion in stolen wages a year.

Where Does Wage Theft Occur?

Australia has a sad history of wage theft, with a recent class action paying out stolen wages to Aboriginal workers in Queensland. Additionally, the Inquiry into the ‘Wages and Conditions of People Working under the 417 Working Holiday Visa Program’ found exploitation of foreign workers is rife, with almost a third of workers not receiving payment for some or all of the work they did.

Recently, wage theft has been all over the news, with millions of dollars in wages not being paid to workers in popular franchises and well known establishments across Australia.

Let’s look at some examples of how wage theft can occur through underpaying entitlements.

One of the most recent examples is the University of Melbourne, where wage theft occurred over the course of a decade and affected over 1500 staff. The University of Melbourne incorrectly applied ‘piece rates’ to staff, while misnaming tutorials ‘practice classes’ to avoid paying the full rate to staff.

Noticed the judges on Masterchef look a bit different lately? One of the most famous examples of wage theft is George Calombaris of Masterchef, who underpaid staff through incorrectly applying annualised salary arrangements and incorrectly applying the Modern Award to some staff. As a result, many staff weren’t paid overtime or penalty rates. The reputational damage to Calombaris’ enterprise and brand was huge and hasn’t recovered.

What Are the Consequences Of Wage Theft?

The human toll is significant, with the litigant style redress for victims of wage theft costly, stressful and lengthy. This means that many employees who are aware they have been underpaid choose not to go through the process to get their wages back.

For a business, there may be heavy financial penalties. Wage theft can also damage or ruin a business’ reputation and brand.

I’m a Small Business Owner: What If I Accidentally Underpay My Staff?

We know that large corporations are not immune, but small businesses who do not have dedicated payroll officers are at particular risk of underpaying workers.

This means that even if you have the best of intentions, if you have not correctly navigated the Modern Award that applies to your employee, you could well be underpaying them.

Understanding Modern Awards can be complex, and there are different structures available to you as an employer to pay your employees. You’ll also need to be aware of any updates to Modern Awards.

If you find it overwhelming, you can get professional help to set up your business to ensure you are paying your staff correctly.

It’s imperative to get this right, so don’t be afraid to get legal advice to set this up.

What Happens If I Have Mistakenly Underpaid My Employees?

If you realise you have been underpaying your employees, you need to address this as soon as possible. You will need to figure out how much you have underpaid your employees, and for how long.

You will need to back pay your staff as soon as possible, and let them know of the error. Fairwork has a step-by-step guide you can consult.

What Are The New Laws To Fight Wage Theft?

Victoria is the first state to introduce legislation aimed at fighting wage theft. It is now a criminal offence to deliberately underpay your employees, with a maximum of 10 years imprisonment, and a maximum fine of $1 million.

There is also a federal body, the Fair Work Ombudsman, which aims to help employees reclaim their pay. The Fair Work Ombudsman also has the power to fine businesses.

What Next?

Here at Sprintlaw, our employment lawyers are experienced in helping business owners both set up employment contracts, and analyse Modern Awards. We can also help you with a consultation if you just want to discuss your concerns and already have contracts in place.

Feel free to contact us at team@sprintlaw.com.au or on 1800 730 617 for a free consultation.

Justine Wu

Justine is a legal consultant at Sprintlaw. She has experience in civil law and human rights law with a double degree in law and media production. Justine has an interest in intellectual property and employment law.

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