• Written by Tess Hardy, Senior Lecturer in Law, University of Melbourne

Australian supermarket giant Coles and discount chain Target this week joined an ignominious list of large corporations caught up in “wage theft” scandals.

Coles confessed to underpaying salaried employees about A$20 million over the past six years. Target admitted to underpaying staff about A$9 million.

Other large companies that have underpaid employees include Bunnings, which underpaid its staff about A$4 million in superannuation entitlements, and Woolworths, which underpaid employees up to A$300 million over ten years.

These cases – along with a string of others involving small and medium enterprises – reinforce the need for reform.

Read more: Shocking yet not surprising: wage theft has become a culturally accepted part of business

Australian Attorney-General Christian Porter has said he will introduce legislation within weeks to criminalise the worst cases of worker exploitation and underpayment.

Heavier sanctions may be appropriate. But harsher civil or criminal penalties will not, on their own, lead to greater compliance.

Beyond penalties and punishment

Not surprisingly, Rob Scott, the chief executive of Wesfarmers (the parent company of both Target and Bunnings), is among those opposed to penalising companies for “inadvertent administrative errors”.

“I’m not sure more punitive penalties are necessarily going to change behaviour at all,” he said this week. “There have been some significant issues across payroll systems in the market, which in part reflects the incredible complexity of the systems that we’re dealing with.”

Read more: No, a 'complex' system is not to blame for corporate wage theft

Even if these underpayments were not deliberate, companies were – in the words of Fair Work Ombudsman Sandra Parker – “lax and lazy” about complying with their obligations. It is hard to believe a corporation like Wesfarmers – one of Australia’s ten biggest listed companies – does not have the resources to pay people correctly.

Nonetheless, Scott does raise a valid point. Changing the compliance culture in Australia will not be straightforward.

There is much research that suggests promoting, achieving and sustaining compliance with the law is about much more than just penalties, punishment and deterrence.

There is also limited evidence to support the idea that criminalising wage theft will alone act as a regulatory panacea. This is especially the case where underpayment is primarily committed by corporations rather than individuals.

Risk of detection

My colleague John Howe and I have researched employer non-compliance with the Fair Work Act in the hairdressing and restaurant industries. Our findings confirm conclusions drawn in previous studies relating to environmental violations, tax evasion and cartel conduct: it is the perceived risk of detection, not the severity of the sanction, that is most likely to enhance deterrence and encourage compliance.

If the perception of being caught is critical, then what counts are the resources available to the Fair Work Ombudsman to strategically intervene and to be seen to be doing so - that is, by widely publicising enforcement outcomes.

On these points the current system has at least two vulnerabilities. These will remain even if criminal penalties are introduced and civil penalties increased.

First, various federal government commitments to boost funding for the Fair Work Ombudsman have not resulted in any discernible increase in the number of Fair Work inspectors or other staff.

It is no coincidence that trade unions – the organisations that have historically supplemented government detection efforts – are struggling to keep up with demand in the sectors most prone to wage theft, such as horticulture and hospitality.

Read more: All these celebrity restaurant wage-theft scandals point to an industry norm

While Porter is promising the “most vigorous, robust and complete set of laws around wage underpayment that Australia’s ever seen”, there’s no sign the government will do anything that might enhance the role of the union in this space.

Contraventions are generally detected by the regulator through proactive inspections and individual complaints. But most complaints are settled confidentially. This may mean quicker redress for workers, but it has limited deterrent effect.

Effective reforms

The prospect of criminalising wage theft grabs headlines. But in making this change it is essential policy makers do not lose sight of the total reform agenda needed to make a real difference.

The Fair Work Ombudsman needs sufficient resourcing and enhanced enforcement tools and detection mechanisms. Dispute-resolution and court processes for workers seeking to recover pay need to be streamlined.

Finally, all of this should be publicised, so employers know transgressions of workplace law – inadvertent or not – have consequences.

Correction: this article’s conclusion has been amended to remove imputations introduced through editing. All activities of the Fair Work Ombudsman, not just possible prosecutions and penalties, need to be publicised for deterrence purposes.

Tess Hardy receives funding from the Australian Research Council for her Discovery Early Career Researcher project titled: Work in Franchises: Searching for Solutions on the Regulatory Frontier (DE180100279).

Authors: Tess Hardy, Senior Lecturer in Law, University of Melbourne

Read more https://theconversation.com/criminal-penalties-for-corporate-wage-theft-are-appealing-but-wont-fix-the-problem-on-their-own-132021

Carpet Cleaning Tips

After work, the best feeling is to get home, your haven, where you can find peace and calm. But when you take a glance at your carpet, your heart shatters into pieces. The grime, dirt, and is it all...

News Company - avatar News Company

All Australians will be able to access telehealth under new $1.1 billion coronavirus program

Scott Morrison will unveil on Sunday a $1.1 billion set of measures to make Medicare telehealth services generally available during the coronavirus pandemic and to support mental health, domestic viol...

Michelle Grattan, Professorial Fellow, University of Canberra - avatar Michelle Grattan, Professorial Fellow, University of Canberra

How much more expensive is a two storey home?

The idea of adding a second storey to your home is exhilarating. Imagine, more living space, more bedrooms, more bathrooms, and a significant bump on the resale value of your home! For families, ha...

Digital 360 - avatar Digital 360

Parents, These FAQs Will Help You Prep for Childcare in Australia

If you’re a new immigrant in Australia, perhaps you have plenty of questions about childhood education. What school should you pick, or what’s the best age for them to attend school? To help you...

Darren Cunningham - avatar Darren Cunningham

Hotel quarantine for returning Aussies and 'hibernation' assistance for businesses

All Australians arriving from overseas will be quarantined in hotels or other facilities under strict supervision for a fortnight, under the latest crackdown in the battle against the coronavirus.Anno...

Michelle Grattan, Professorial Fellow, University of Canberra - avatar Michelle Grattan, Professorial Fellow, University of Canberra

how sharing your data could help in New Zealand's level 4 lockdown

New Zealand and much of the world is now under an unprecedented lockdown. Public health experts say this is the best way to suppress the spread of the virus. But how long will such a lockdown be socia...

Jon MacKay, Lecturer, Business Analytics, University of Auckland - avatar Jon MacKay, Lecturer, Business Analytics, University of Auckland

What is orthohantavirus? The virus many are Googling (but you really don't need to worry about)

ShutterstockAccording to Google Trends, the top globally trending topic this week is “orthohantavirus”, as spurious sites claim it’s the next pandemic on the horizon.Take it from me:...

Allen Cheng, Professor in Infectious Diseases Epidemiology, Monash University - avatar Allen Cheng, Professor in Infectious Diseases Epidemiology, Monash University

MyGov's ill-timed meltdown could have been avoided with 'elastic computing'

DAN PELED/AAPThese past few weeks have shown the brittleness of Australia’s online systems. It’s not surprising the federal government’s traditionally slow-moving IT systems are buck...

Erica Mealy, Lecturer in Computer Science, University of the Sunshine Coast - avatar Erica Mealy, Lecturer in Computer Science, University of the Sunshine Coast

Why New Zealand’s coronavirus cases will keep rising for weeks, even in level 4 lockdown

ShutterstockThe number of New Zealanders testing positive for COVID-19 will continue to rise despite the strict conditions of the four-week lockdown that began this week. As of today, there are 368 ca...

Arindam Basu, Associate Professor, Epidemiology and Environmental Health, University of Canterbury - avatar Arindam Basu, Associate Professor, Epidemiology and Environmental Health, University of Canterbury

Sick and Tired of Your Dead End Job? Try Teaching!

Tired of the same old grind at the office? Want an opportunity to impact lives both in your community and around the world? Do you love to travel and have new experiences? Teaching English is the perfect job for you! All you need is a willingness to ...

News Company - avatar News Company

The Impact of an Aging Population in Australia

There’s an issue on the horizon that Australia needs to prepare for. The portion of elderly citizens that make up the country’s overall population is increasing, and we might not have the infrastructure in place to support this. Australians h...

News Company - avatar News Company


News Company Media Core

Content & Technology Connecting Global Audiences

More Information - Less Opinion