"Wage theft” – Australia’s modern award system is causing problems

Out-Law News | 09 Oct 2020 | 12:00 am |

Patrick Williams comments on the issue of Australian employers miscalculating wages.
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  • Transcript

    Wage theft is not a term that many people would recognise in the UK, but if you do business in Australia then it is a concept worth understanding. It's not a legal term but loosely refers to employers who underpay employees or fail to provide them with all their entitlements either wilfully or due to ignorance and is a big issue In Australia. Last year Prime Minister, Scott Morrison, announced that the government would legislate to criminalise the practice, and that is now happening –two of Australia’s state governments have recently passed wage theft legislation. It's news that has been picked up by our Perth-based lawyer Katie Williams in a recent article for Outlaw where she says the number of companies reporting miscalculations is growing which, she says, may be down to the fact that Australia's so-called Modern Award system is too complex. In other words, the legal documents which set minimum pay rates and terms of employment are the root cause of the problem. So let’s hear more about that, and so-called "wage theft". Paddy Williams, no relation, joined me by video-link from the Perth office.

    Patrick Williams: "So the modern awards system is a very unique Australian beast. It has got its origins dating back to pre-colonial, pre-federation times. In fact for much of Australia's history it has really been one of the systems that's provided a lot of entitlements and obligations in Australia's employment landscape. Currently, there are 122 modern awards in Australia and these apply to national system employers and employees, so basically those covered by the Fair Work Act, and what it essentially does is provides various entitlements to employees and places various obligations on employers, which essentially go above and beyond the basic national entitlements, so the NES system for those familiar with it in Australia. The reason it's quite important to know this is because various things are set by modern awards. So the most obvious one is payment entitlements, things like overtime, rates for shift workers, penalty rates on weekends and public holidays and all those sorts of things, but it can also provide various other entitlements for employees, things like setting working hours, it might potentially provide additional entitlements in relation to notice on termination, things like redundancy pay and all those sorts of entitlements too. So there are various things that it can affect and it's quite important to know whether or not your workforce is covered by a modern award. Most workforces in Australia, it's fair to say, will have at least some of their employees covered by a modern award. Not necessarily all employees covered by a modern award, but certainly most would be. The last statistic that I believe I saw is that some 2.2 million Australians have their pay entitlements set by a modern award, but a modern award will also be determined in some form if you have enterprise agreements that apply to your workforce and that's because the enterprise agreement is usually compared against the basic entitlements of the modern award when you're looking to negotiate your enterprise agreement. There are a lot of underpayment scandals that came out in Australia last year, and they continue to arise this year. What we saw in response to that was the federal government looking at potentially criminalising what has been termed "wage theft", though that's not necessarily a term of art and we've now seen, subsequently, two states, Victoria and Queensland, introduce their own wage theft legislation and what that has meant is that it is now really placed front and centre in the minds of a lot of employers to make sure that they are getting things right. Modern awards aren't necessarily the only reason why you may not have complied with your payment obligations but in our experience it's certainly one of the main ways that an employer might trip up when they're looking to make sure they comply. I think what we've seen with all of the news headlines, and indeed the legislation and the potential legislation, is really that there's never been a better time to make sure you are complying with any award obligations. The first thing is to actually know what awards apply to your workforce and what those obligations are but even employers who think they know what their obligations are might be surprised by some of the more obscure terms in modern awards and the actual application of modern awards is always changing. There have been a number of changes to the miscellaneous award recently that means the coverage of that has been broadened. So really, I think the key message is for employers to make sure they understand what the obligations are, and if they're not sure, then seek advice on both the award coverage provisions and the payment and other obligations that arise under modern awards."