Criminal Liability for ‘Wage Theft’: A Regulatory Panacea' by Tess Hardy, John Howe and Melissa Kennedy in 47(1) Monash University Law Review comments
In response to concerns over the growing problem of ‘wage theft’, the federal government, as well as various state governments, have committed to introducing criminal sanctions for underpayment contraventions. While policymakers and the public have largely assumed that criminal sanctions will address a perceived deterrence gap and promote employer compliance with basic employment standards, there has been far less scholarly appraisal of how this regulatory shift might shape enforcement decisions and affect compliance outcomes. Drawing on literature from criminology, as well as regulation and governance, this article evaluates a range of conceptual justifications put forward in support of criminalising certain forms of wage theft. It also considers key practical issues which may arise in a dual track system where both criminal and civil sanctions are available for the same or similar contraventions. This article concludes with some suggestions on how criminal offences might be framed in the federal system so as to optimise employer compliance and reduce regulatory tensions.
The authors argue
There is mounting evidence that many workers have experienced serious and systemic underpayment of basic employment entitlements, notwithstanding the efforts of the Office of the Fair Work Ombudsman (‘FWO’) over the past decade. ‘Wage theft’ has been uncovered in high-profile businesses, such as 7-Eleven, Domino’s Pizza, Woolworths and the well-known restaurant empire formerly owned and operated by the celebrity chef, George Calombaris. The economic recession resulting from the COVID-19 crisis is likely to further exacerbate these pre-existing problems.
The term ‘wage theft’ was first coined in the United States (‘US’), where wilful breach of wage and hours regulation constitutes a criminal offence. More generally, ‘wage theft’ has been used to label a range of unscrupulous employer practices from sham contracting to unlawful deductions. The range of practices captured by the term ‘wage theft’ is potentially quite varied; however, the outcome for affected employees is somewhat similar — that is, ‘each deprives the victims of what is lawfully due to them as remuneration for their labour’.
The use of the term ‘wage theft’ in the Australian context is increasingly popular but is somewhat misplaced in that it suggests that underpayment entails a level of criminality. In actual fact, failure to comply with minimum wages prescribed by the Fair Work Act 2009 (Cth) (‘FW Act’), or a term of an industrial instrument made under that Act, is solely treated as a breach of a civil remedy provision under the federal law. Up until June 2020, breach of employment standards regulation did not constitute a criminal offence in any Australian jurisdiction — Commonwealth or state. However, this longstanding position is now in a state of great flux.
In June 2020 and September 2020 respectively, the Victorian and Queensland governments passed legislation introducing criminal sanctions for wage theft offences. It also initially looked like the Western Australian government would follow a similar regulatory path. However, it remains possible that these state developments may be superseded by law reform in the federal sphere. In particular, following the Report of the Migrant Workers’Taskforce (‘Taskforce Report’), and an extensive consultation process undertaken by the Attorney-General’s Department (‘AGD’), the Coalition government introduced the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (Cth) (‘Omnibus Bill’). Amongst other matters, this Bill included a new criminal offence where an employer ‘dishonestly engages in a systematic pattern of underpaying one or more employees’. Ultimately, and somewhat unexpectedly, at the time of completion of this article, the criminal offence provisions were withdrawn by the Coalition Government following chaotic negotiations in the Australian Senate over passage of the Bill. During this same period, and running alongside the various wage theft inquiries, the Australian Law Reform Commission (‘ALRC’) conducted an inquiry into corporate criminal responsibility under federal laws, including the FW Act.
Although there has been a sustained push to introduce criminal sanctions in the context of employment standards regulation, and there is now political commitment to do so, there has been limited scholarly consideration of the relevant regulatory consequences of such a move. As Jennifer Collins observes: ‘principled decision-making between regulatory channels is a key and under-theorized juncture in appraising criminalization arguments about exploitation in work relations’. This article is directed at addressing some of the key issues arising at this juncture.
The focus of our article is on the federal civil enforcement system under the FW Act and its interactions with criminal sanctions. This is linked to the fact that the majority of workers are covered by the FW Act and fall within the national system of workplace relations regulation. While we refer to a number of state developments in passing, we avoid sustained discussion of the state initiatives, as this raises the complex constitutional questions that go beyond the scope of this article. Instead, we analyse the more foundational question of whether the introduction of criminal sanctions for underpayment contraventions in federal law is conceptually robust and likely to achieve the stated policy objectives, such as the delivery of greater deterrence and the promotion of more sustained compliance. We also consider some of the potential pitfalls associated with a ‘dual track’ system where both criminal and civil sanctions are available for the same or similar contraventions.
We begin our analysis by reviewing the current enforcement regime under the FW Act and considering the common justifications for introducing criminal liability for breach of employment standards. We then evaluate these justifications against conceptual considerations drawn from criminology and regulation and governance literature, as well as the practical issues which should be considered in the implementation of such an approach. Much of this analysis is broadly directed at the question of whether criminalisation of underpayment contraventions is the most appropriate or effective vehicle for addressing systemic ‘wage theft’.
We ultimately accept that the introduction of criminal liability is justified from a moral and regulatory perspective. However, in reaching this conclusion, we are also keen to ensure that criminal sanctions are integrated into the existing regulatory framework so as to optimise employer compliance and reduce regulatory resistance. In putting forward some suggestions about the shape of possible reform, we take account of key issues identified in the existing literature, as well as the ALRC’s recent review of the principles for designating criminal offences and civil penalty provisions in the regulation of corporations across different regulatory regimes in Australia.
