For Victorian employees, the Victorian Government’s Wage Theft laws to commence on 1 July 2021, are no longer “A waste of time and money”.
In July 2020, Attorney General and Industrial Relations Minister Christian Porter hailed Victoria’s Wage Theft laws as “A waste of time and money”. 9 months later, the Morrison Government’s withdrawal of wage theft laws from the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2021 on 18 March, means that most of the nation, except Victoria and Queensland, will not have any significant wage theft laws which impose significant penalties on employers for dishonestly withholding wages and other entitlements.
The main features of Victoria’s Wage Theft laws are –
- Employers who employ Victorian based employees must not dishonestly withhold any employment entitlement (this includes superannuation) or authorise/permit someone else to withhold entitlements (s.6)(1). Officers of Employers (i.e. like a Director/Secretary or a person with significant decision-making powers in a company) have the same obligations [s.6(7) (penalty 6000 penalty units – currently $991,320, or in the case of a person up to 5 years imprisonment].
- Withholding includes failing to pay, deducting, or requiring a payment towards a fee or the payment of an amount from the employee’s entitlements (s.3(1)). Unlike the original Commonwealth wage theft provisions (now removed from the Bill), there does not need to be a “systematic pattern” of underpayment for an offence to be committed;¹
- It is no defence for an employer to argue that the employee consents or agrees to the withholding if the effect of withholding reduces the entitlement below minimum rates owed to the employee – i.e. such as reducing annual leave hours below that which would have accrued (s.6(2));
- Significantly, Dishonesty is assessed not according to the employer or officer’s state of mind or belief but according to a reasonableness standard (s.6(11)) (this goes further than the original Commonwealth wage theft provisions which allowed employers to plead as a defence that they were not dishonest because of their genuinely held belief of what they knew to be dishonest as per the standards of ordinary people);²
- “An authorisation or permission” by an Employer can be proved if the Employer’s Board of Management or Officer expressly or impliedly authorised or permitted the withholding, unless the Employer proves they exercised due diligence to prevent the authorisation or permission (s.6(3)(a) & s.6(4)).
- Authorisation or permission by an Employer will also established where an employee proves “a corporate culture existed” that directed, encouraged, tolerated or led to the conduct being carried out (s.6(3)). This for example might include a company being reckless or turning a blind eye to the risks of an underpayment occurring over a long period of time knowing there might be that possibility but ignoring that risk.
- It is a general defence for an employer or officer accused of wage theft, if they prove that before the alleged offence, they exercised due diligence to pay or attribute the entitlements to the employee (s.6(5)). However, if the employer fails to comply with the regulator’s requirement to pay an employees their lawful entitlements, that will mean they have not taken all reasonable steps to pay the employee (s.6(6)) (suggesting a lack of due diligence).
Falsifying documents – an Offence
- Employers falsifying an employee entitlement record or authorising/permitting a falsification (like a time sheet or pay slip and possibly even a roster), with a view to dishonestly obtain a financial advantage or to prevent the exposure of the financial advantage may be found guilty of an offence (s.7) (up to 6000 penalty units – presently $991,320 for a company or up to 10 years imprisonment for an individual).
Failing to keep an employee entitlement record – an Offence
- There are also offences for an Employer or Officer to fail to keep or authorising /permitting another person to fail to keep an employee entitlement record with the view to dishonestly obtaining a financial advantage for the employer or to prevent its exposure (the same penalty applies as per the other offences above) (s.8).
Vicarious liability of Companies
- Body Corporates and companies cannot hide behind individual Officers for any offences committed by them under the Act (except where they exercise due diligence) if the officer acted within the scope of their employment or actual/apparent authority. Companies are taken to commit the offence (even if the officer has not been prosecuted) (s.10(1) &11)). The knowledge, intention or belief of the Board or Officer, is attributed or brought home to the body corporate or company (s.11(1)(a)).
- Actions of Employees or Agents of the Company (“Associates”) withholding wages or entitlements, will be attributed to the Body Corporate or Company if the Officer or Board authorised or permitted the relevant conduct to be carried out, or a corporate culture existed which encouraged, tolerated or led to the conduct (s.11(2))). Factors relevant to whether a “culture exists” include whether authority to commit the offence (like withholding wages) was given by an officer or whether the Associate (e.g., an employee) held a reasonable belief or expectation, that an Officer would have authorised /permitted the conduct (s.12)(b));
Personal liability for Officers of Companies
- Each Officer of the Body Corporate or Company is taken to commit an offence of the Body corporate, but it is a defence for the officer to prove they exercised due diligence (s.13(1) & (2), except the officer cannot be sentenced to imprisonment for an offence of the Company attributed to them (s13(3)).
- Partners of partnerships and members of unincorporated associations are also liable for offences committed by their respective entities (ss.14-15).
The Wage Inspectorate’s wide investigation and prosecution powers
- The Wage Inspectorate will be able to request documents, investigate and prosecute any offences (s.20) and may enter workplaces without the consent of the occupier subject to giving prior notice of entry of 5 business days, or where it has reason to believe that a delay to entry is likely to result in the commission of an offence or concealment, loss or destruction of evidence (s.40)(c)). Otherwise, the Inspectorate can apply for a search warrant of employee entitlement records (s.44).
- Perhaps the most far-reaching power of the Inspectorate is to require a person to attend their offices and answer questions or produce documents and give evidence under oath or affirmation (s.52). A person’s evidence must be recorded (s.58) however a person may refuse to give evidence if they have a reasonable excuse (s.69). Employers cannot refuse to provide documents if by doing so might incriminate them in an offence (s.55(1))
- The Inspectorate can accept undertakings as to compliance (s.63).
- Anyone hindering or obstructing inspectors without lawful excuse face severe penalties [300 penalty units for a company (presently $49,566) or Level 9 fine / 60 penalty units maximum (presently 9,913.20) (s.66(1)(c)).
1. Item 46, Schedule 5 of the Fair Work Amendment (Supporting Australia’s Jobs & Economic Recovery) Bill 2021
2. Item 42, Schedule 5 of the Fair Work Amendment (Supporting Australia’s Jobs & Economic Recovery) Bill 2021