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Ai Group’s submission – Government IR Discussion Paper on Strengthening penalties for non-compliance

The Australian Industry Group has lodged its submission in response to the Attorney-General's Department discussion paper on Improving protections of employees' wages and entitlements: Strengthening penalties for non-compliance (Discussion Paper). The Discussion Paper invites input on the penalty framework in the Fair Work Act 2009 (FW Act).

Ai Group supports and encourages lawful workplace practices by all parties and does not support any deliberate underpayment of wages or other entitlements. Most businesses devote substantial time and resources to ensuring that they pay their employees correctly.

Ai Group agrees with the important distinction made in the Discussion Paper between employers that have made genuine mistakes which have led to miscalculations and underpayments, and employers that deliberately underpay their employees. Many instances of incorrect payment are a result of misunderstanding or error. Employers should not be at risk of being labelled a 'thief' for such mistakes.

This submission argues that:

1. Given that the Protecting Vulnerable Workers Amendments to the FW Act, which increased penalties by up to 20 times, have only been in place for two years, there is inadequate evidence at this early stage to conclude that the measures will not be effective in addressing underpayments. The Australian Government has made it clear that any changes to Australia’s workplace relations system should be evidence-based.

2. Over the past 12 months there has been a substantial increase in the number of underpayments self-reported to the FWO and remedied by employers. As acknowledged in the FWO’s 2018-19 annual report, this development suggests that ‘compliance and enforcement activities are creating the desired effect’.

3. Ai Group opposes any disturbance to the existing accessorial liability provisions in the FW Act. These provisions are working effectively and as intended. Lowering the test to one of ‘recklessness’ rather than actual knowledge, would be unfair given the extreme complexity of Australia’s workplace relations system, with thousands of pages of relevant legislation, regulations and award provisions. It is very challenging for large businesses and HR professionals to successfully navigate the workplace relations system, and even more challenging for SMEs.

4. There are many legitimate reasons why businesses engage in outsourcing and subcontracting. There would be many adverse consequences of imposing liabilities on businesses for underpayments of other businesses that they have outsourced or subcontracted work to. This proposal would operate as a major barrier to the restructuring of businesses and would impede productivity and competitiveness. It would also operate as a barrier to investment in Australia. More businesses would be driven offshore or wound up, and more jobs would be lost.

5. Ai Group strongly opposes the introduction of criminal penalties for wage underpayments. While at first glance, the introduction of criminal penalties for underpayments might seem like a good idea, there are many reasons why this is not in anyone's interests and needs to be rejected, including:

    1. Implementing criminal penalties for wage underpayments would discourage investment, entrepreneurship and employment growth;
    2. Exposing directors and managers of businesses to criminal penalties would operate as a major barrier to employers self-disclosing underpayments to the FWO; and
    3. Importantly, a criminal case would not deliver any back-pay to an underpaid worker. Where a criminal case is underway, any civil case to recoup unpaid amounts would no doubt be put on hold by the Court until the criminal case is concluded. This means that underpaid workers could be waiting years for redress.

Read the full submission here

Media Enquiries: Tony Melville - 0419 190 347