In the midst of robust discussions about the potential reform of Australia’s industrial relations system, late on 16 June, the Victorian Parliament passed the Wage Theft Bill 2020.

Upon commencement on a date to be proclaimed or else from 1 July 2021, the wage theft laws will make it a criminal offence, punishable by fines of up to $198,264 for individuals, $991,320 for companies, or up to 10 years’ imprisonment, to dishonestly withhold employee entitlements, dishonestly falsify an employee’s employment records or dishonestly fail to keep employee entitlement records.

The wage theft laws have noble aims, but their critical deficiency is that they are disconnected from the regulation and enforcement system they are intended to supplement. With limited exceptions around long service leave, child employment and other discrete areas of employment law, our minimum employment entitlements are derived from Federal, not State, law.

This creates two critical questions: one, whether the laws have constitutional validity and, two, whether they are reasonably capable of achieving their aims.

In 1996, Victoria referred the bulk of its industrial relations powers to the Commonwealth Government. Put very simply, this gave the Commonwealth Government its power to legislate the Fair Work Act 2009 and predecessor workplace laws to cover Victorian employers and employees, the Fair Work Ombudsman the power to regulate those laws, and the Fair Work Commission, Federal Circuit Court and Federal Court the jurisdiction to enforce those laws.

To keep things neat, the Australian Constitution provides that, to the extent of any inconsistency, a law of the Commonwealth will prevail over a law of the State. So, while the States do have power to make laws about criminal matters, the Commonwealth has power to make laws about the regulation and enforcement of workplace matters. A live question accordingly arises as to whether the Victorian wage theft laws have constitutional validity, particularly if the Commonwealth creates its own wage theft laws, as has been mooted by the Industrial Relations Minister, Christian Porter.

More fundamentally, the wage theft laws do nothing to make it easier for employers to understand and comply with their minimum wages obligations. The wage theft laws also do nothing to support the Fair Work Ombudsman to regulate employer compliance with their minimum wages obligations.

To the extent that there are flaws in our workplace relations system around the enforcement of minimum wage and employee recordkeeping laws, the proper mechanism for dealing with this is under Commonwealth law. The neighbour’s guard dog might create some level of dissuasion for burglars scoping out your property, but it will ultimately not remedy the gaps in your own security perimeter.

For Victorian employers considering how the wage theft laws will affect them, the Victorian Government has been clear that employers who make honest mistakes or who exercise due diligence in paying wages and other employee entitlements will not be subject to the legislation.

Notwithstanding that the concept of “wage theft” has largely emerged out of a run of high-profile self-reports of wages non-compliance in big business arising from payroll system problems, these big business errors will not be the primary focus of the new Wage Inspectorate’s attention.

The wage theft laws will however elevate the existing risk for small businesses utilising a level of “cashie” labour, and it is foreseeable that small businesses without dedicated human resources and payroll staff will be disproportionately exposed to the wage theft laws, with a line to be defined between an incompetent failure to make and amend employee records and a dishonest failure to make and amend employee records.

In the absence of a simplified workplace regulatory system and enhanced education around wages obligations, the threat of throwing small business owners behind bars only creates anxiety for those trying to do the right thing, and incentivises others to do a better job of hiding their books.

It will accordingly remain to be seen whether the laws will turn out to be more bite or more bark.

Katie Sweatman
Special Counsel
+61 3 9958 9605
[email protected]