Employers Could Face Jail Time Under Proposed IR Reform

Published September 19, 2019 (last updated July 20, 2020) -

The Morrison government will today release a highly polarising discussion paper inviting submissions on options for criminalising wage theft and proposed new penalties for worker underpayments.

Early reports suggest that the paper will address jail terms of up to 10 years and fines that will be “broadly proportionate” with existing penalties for comparable offences and worker exploitation.

Industrial Relations Minister, Mr Christian Porter, said the government was committed to introducing “strong and effective criminal sanctions to help stamp out deliberate and systematic wage theft.”

However, Mr Porter stressed the new criminal penalties would “rightly apply only to the most serious types of offending where there is clear evidence of persistent or repeat-offending or offending on a significant scale.”

Mr Porter said the government will engage in a consultative process to “ensure that any new penalty regime is fit for purpose and avoids any unintended consequences;” adding, that any final reforms must satisfy three criteria, namely promoting jobs and wage growth, improving productivity and growing the economy.

Prime Minister Scott Morrison has also publicly committed to criminalise wage theft in recent news reports however, the paper will allow unions and business groups a chance to have input via submissions on a range of issues; including the thresholds at which certain behaviour should be criminalised, the potential penalties and how the changes would apply.

Not all employers are deliberate ‘thieves.’

Challenging the concept of criminalisation, Senior Employment Relations Adviser from Employsure, Michael Wilkinson says the problem with criminalising worker exploitation or underpayments is that, “it sends the underlying message that, “all employers are out to exploit workers and they should be locked up in a cell.”

“Before we mislabel an entire section of Australia’s economy as bosses intent on ripping off their staff, can we perhaps examine the deeper reasons why employers might be struggling to pay their staff correctly?”

While Mr Wilkinson admits wage underpayment is an “undeniable problem” across the country, he says government should be investigating the causes, educating and supporting employers with a resources to rectify issues, “rather than heaping more regulation, compliance, financial penalties – and now criminal sanction onto employers.”

“I’m not condoning the deliberate underpayment or exploitation of employees. From my experience the vast majority of businesses work very hard to ensure their employees are properly paid. The Employsure workplace advice line receives over 260,000 thousand calls a year from businesses seeking clarity on these matters. This shows that businesses are actively seeking help,” he said.

The punishments for worker exploitation are serious enough.

Further challenging the proposals, Mr Wilkinson argues that throughout Australia’s history, wage underpayment has been considered a civil issue that falls within the employment relations framework. “There are already substantial penalties for any business that deliberately underpays its workers. Serious penalties already extend to individual managers ‘involved’ in wage underpayment.”

“Although we already have the means to address underpayment, why is the government now calling for a change? Whilst it might be good ‘politics’ it is not good for businesses.”

“If we bring wage payments into the criminal system, what happens next? Will the misuse of sick leave become known as ‘time theft’ and also become a criminal offence?”

It’s hard enough for employers to understand all the rules.

“Systematic underpayment is a serious matter but, in most cases it is honest errors and a lack of understanding of entitlements that put businesses at risk.”

With one of the most complex workplace relations systems in the world, Mr Wilkinson says 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.”

“Thirty percent of calls from our business clients relate to basic employee entitlements, so it’s clearly an area where they struggle.”

“We have had significant consultations with small businesses and the overwhelming view is the legislation is far too complicated for the majority of Australian businesses with less than 20 employees and no expert HR or legal departments. Imagine, what this system is like for a small business owner. Not only do they have to deal with day to day business, they also have to juggle pay rates, stock, inventory, supply chain, rostering, marketing, and customer service.”

Educate, without threats.

The key objective of governments in this space according to Mr Wilkinson should be to make it as easy as possible for employers and employees to know their rights. The compliance system needs to be “sufficiently robust to deter the small proportion of employers who would be tempted to do the wrong thing.” Adding, “most problems arise because of misunderstandings about the application of the law, rather than a blatant disregard for it. It shouldn’t be rocket science,” he said.

Nobody wins.

In his closing statements, Mr Wilkinson says, “Nobody wins if employees lose their jobs when a business closes because of the size of the fine or because the employer has been imprisoned. It doesn’t make sense. Why create fear in the business community?”

“Small businesses in particular, need help – not threats of jail time.”

The submission closing date is Friday 25 October 2019.

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