News National Wage-theft law change could hurt small businesses even more

Wage-theft law change could hurt small businesses even more

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When a trio of takeaway sushi outlets were caught deliberately underpaying their staff – and lying about it – the operators were slapped with record-breaking penalties.

In addition to the company fines, which totalled $600,000, two bosses at Hero Sushi each forked out $85,000, while three payroll officers lost $121,000 combined.

After receiving their punishment, a total sum of $891,000, in May this year it’s unlikely they’ll try the same tricks again.

Now, under new rules outlined in the Morrison government’s proposed industrial relations bill – which has been slammed by unions and the Opposition – the penalties could be even higher.

Those bosses could be in jail for up to four years.

But there are fears the harsh rules aimed at cracking down on wage theft may unfairly punish small business owners – and put even more power in the pockets of big business.

The New Daily understands the new criminal offence will only apply to the most serious breaches where an employer dishonestly engages in a deliberate and systematic pattern of underpaying one or more employees.

It will not apply to one-off underpayments, inadvertent mistakes or miscalculations.

Under the new offence, rule-breakers face a maximum fine exceeding $1.1 million, jail time for up to four years for individuals, and a fine of more than $5.5 million for a corporation.

Individuals will also be banned from managing corporations for five years.

Civil penalties for breaches of workplace laws will be boosted by 50 per cent, with fines up to $19,980 for individuals and $99,000 for corporations.

Bigger businesses will be subjected to penalties based on two, or even three times the benefit obtained, while the maximum penalties for serious breaches will remain $666,600 for small businesses and $133,200 for individuals.

But after years of having dodgy operators shortchange their staff, will the new criminal offence and huge fines work to stop this behaviour?

Every financial year, millions of dollars are collected from businesses underpaying workers, according to annual reports from the Fair Work Ombudsman.

A breakdown of enforcement data was not included in annual reports prior to 2013/14.

In the last financial year alone, the Fair Work Ombudsman recovered more than $123 million in unpaid wages for 25,583 employees.

This included more than $56.8 million that was back-paid.

That same year, court-ordered penalties in cases totalled more than $4.3 million – including the record penalty of $891,000 handed down to the Hero Sushi outlets.

But despite the Ombudsman nabbing more and more shifty businesses every year, operators are still willing to risk it if it means they can underpay their staff.

Is making wage theft a criminal offence the solution?

Professor Mark Wooden, a labour economics academic at the University of Melbourne, said it was a difficult situation.

“It’s a tricky thing, because do we really want to catch a whole bunch of small businesses?” said Professor Wooden, a member of the Fair Work Commission Expert panel.

“We’re destroying people’s lives effectively… maybe their business was struggling so they underpaid wages a bit. Do we send them to jail for four years?”

Professor Wooden said many small businesses were already struggling to stay afloat, especially during the coronavirus pandemic.

“If one small business (underpays staff), then all the businesses who obey the law, they’ve got a problem,” he said.

“If you’re the only restaurant in the street paying the right wages, you better be putting on the best service.”

The new criminal offence may also make small business owners scared to employ people outside their own trusted social circles.

If this has teeth, if employers get very fearful of this, we will gut our small business industry,” Professor Wooden said.

“Fish ‘n’ chip owners will say, ‘OK I’m only going to employ my family’.”

The threat of jail would likely shift more power into the hands of big business, he added.

“Jail time is a very credible threat – and I think it will be take seriously by a lot of employers – but maybe not the large companies because they’ll be hidden by the organisation,” he said.

“Let’s say it is News Corporation. Is Rupert Murdoch going to jail? Is the chief of Australian operations going to jail?

“They’ll pay the fines, but the jail time threat, you’ve got to link to an individual.”

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