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Legislative Council - Fifty-Fourth Parliament, Second Session (54-2)
2020-07-22 Daily Xml
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Select Committee on Wage Theft in South Australia

The Hon. I. PNEVMATIKOS (16:37): I move:

That the interim report of the committee be noted.

This report results from a parliamentary committee established in October 2018, to inquire into the nature and extent of wage theft in South Australia. The notion of an inquiry into wage theft enjoyed cross-party support, except for concerns raised by the government, particularly in terms of the use of the words 'wage theft'. The government was concerned with the use of the terminology and indicated a preference for the terms of deliberate or noncompliant underpayment instead. This was not supported by the opposition, SA-Best and the Greens who saw wage theft as not only appropriate as a term to be used but recognised its widespread universal use as a term to define the behaviour which became the subject of our inquiry.

The Marshall Liberal government was also concerned, in light of the number of parliamentary committees, whether there would be sufficient time to proceed with the inquiry. It is naive and irresponsible of the government to ignore the issue and pretend that wage theft is not happening in our state, and that our workers and law-abiding businesses are not suffering. It was for these reasons that the inquiry set about to investigate the prevalence of wage theft in our state and to explore options to remedy that.

The committee met on 16 occasions and heard from a variety of witnesses, including organisational, business and union representatives, as well as individuals, and received submissions from 24 groups and individuals. It was the intention of the committee to travel to various regions to hear evidence; however, due to the COVID-19 pandemic, they were only able to hear from individuals and groups in the South-East.

Underlying this inquiry is the expectation that when people go to work they are appropriately paid for their work in accordance with the award and industrial agreements in place. It is unfortunate that this is not a reality for a number of workers. The committee heard evidence of the prevalence of wage theft from exploited workers, trade unions, researchers, community legal services and support centres, multicultural organisations and youth groups.

Their submissions identified, by the provision of data and case studies, the extent of wage theft detailing underpayment of wages, underpayment or non-payment of superannuation, allowances, penalties and leave entitlements. Also identified were practices that resulted in the deliberate manipulation of hours worked, tampering of timesheets and contractual agreements.

It became apparent from the evidence that wage theft was in reality the norm and a basis for a business model directly competing with law-abiding employers and that it was of epidemic proportions. The problem with wage theft in terms of those seeking redress meant that workers were often alone in pursuing those lost entitlements. Responsibility tended to fall on the individual worker rather than the employer in terms of ensuring workers were receiving their full entitlements.

It was the evidence of many workers that, in an environment of ignorance, they would avoid complaining for fear of losing their jobs and future employment prospects. Migrant workers employed under temporary work visa arrangements and international students gave evidence to the inquiry that they were often paid well below the award rate and were required to work excessive hours in breach of their visa requirements whilst simultaneously facing the threat of deportation.

Some employers argued that the reason for noncompliance related to the very structuring of industrial law. It was the evidence of some employer representatives during the inquiry that awards and agreements were difficult to interpret and mistakes occurred as a consequence. For some employers the absence of legal training of staff appeared to be the main reason for mistakes occurring in terms of underpayment and loss of entitlements. By the same token, it was startling that there was no evidence of employers overpaying workers in relation to their entitlements.

The absence of legal training did not seem to be a problem for trade unions in understanding and interpreting awards and agreements, according to their evidence. Some representatives of employer umbrella organisations did provide evidence that they played a role supporting and advising their members but were not forthcoming with data in that regard. Some employer umbrella organisations were of the view that their role was to provide support and assistance to member employer groups at times of disputation when a claim for underpayment had been made by a worker, and they played a minor role in preventative and education programs for their members to ensure that they understood their obligations.

Several employers who gave evidence were of the view that the primary reason for underpayment related to the industrial structures that they were required to operate under, whilst at the same time those same employers also noted satisfaction with the current structures and regulatory frameworks that were in place to deal with any issues of underpayment. This, of course, is despite the evidence of the breadth, depth and complexity of noncompliance and wage theft within the Australian labour force which continues to escalate and alarming rates.

The committee heard evidence of myriad methods being utilised by some employers by not paying or ignoring workers' legal entitlements, which included: non-payment of annual leave; personal leave; parental leave; long service leave and public holidays; non-payment of penalty rates and leave loadings; non-payment of workers compensation, redundancy or severance pay; and non-provision of pay breaks and minimum periods of engagement for shifts.

The committee also heard evidence of more opportunistic forms of wage theft such as: cash in hand payments; employees having to pay an up-front deposit for a job; working for free whilst being trained; employees attending work or training and being paid with gift vouchers; unpaid internships and work experience arrangements, including employees being asked to volunteer extending their work shift but without any pay; employees being required to pay money back in cash to employers after receiving their wages; employers making unauthorised deductions from employees' pay; employees being supplied food and beverages in lieu of wages; and apprentices paying for their TAFE fees and their books, which are obligations that the employer should be paying—and the list goes on and on.

Both before the establishment of the committee and throughout this inquiry we have seen various media reports regularly recounting various cases of big and small businesses—including Coles, Domino's, Woolworths, 7-Elevens, Caltex and the numerous celebrity chefs of this world—massively and deliberately not paying their workforce properly over sustained periods of time.

The evidence adduced confirms what many in our society have suspected, that wage theft is a fundamental component of exploitative practices and misconduct in the workplace. The findings of the inquiry confirmed that there were cases of unscrupulous employers who will take the odds against civil penalties in the belief that there is little chance of being caught and even less so in terms of any punishment or penalties.

In addition to addressing the issue of unfair work practices, there did not appear to be strong support for attempts to level the playing field for employers in circumstances where those employers were doing the right thing by their workers and that they should not be put at a commercial disadvantage by employers who are not playing by the rules. By having a system that does not discipline employers it became apparent that wage theft was undermining law-abiding competitors and driving down wages for all workers in certain industries.

Many workers who gave evidence resented the fact that they were being short-changed by their employer and felt powerless to do anything about it, and this was particularly apparent in areas of low workplace organisation. Despite the existing structures, the McKell Institute submissions saw little federal oversight of wage compliance in South Australia, 'given that there are fewer workplace audits today than there were in the 1970s, 1980s and 1990s'. Their submission goes on to detail that there have only been 23 audits conducted by the Fair Work Ombudsman since 2010, totalling 1,726 (1.19 per cent) employers, with 37.1 per cent of those employers found to be noncompliant to varying degrees.

Similarly, SA Unions submitted that it is 'abundantly clear that the regulatory framework is ineffective'. Submissions and witnesses highlighted how the regulator's approach is ineffective, with the absence of adequate resourcing added to its ineffectiveness. Wage theft is pervasive in small and large industries across the country. The committee heard it to be more prevalent in hospitality; retail; agriculture and horticulture, particularly in fruit picking and vegetable picking as well as food processing; the social and community sector, including NDIS providers; the financial industry; call centres; hairdressing; local government, particularly in libraries; university, education and training; cleaning; butchering and the meat industry; fast food; warehousing; labour hire; and construction.

The federal government's inability to oversee the huge number of underpayments through the FWO means that something has to change. Many said to the inquiry that only a small number of cases are pursued and that the system is unable to cope with the volume of grievances and complaints. The interim report gives substantial evidence that the current systems are failing.

The McKell Institute thoroughly investigated the extent of wage theft and produced significant data to the committee, based on data from every nationally focused audit conducted by the Fair Work Ombudsman. Between 45 per cent and 76 per cent of workers are underpaid or not paid penalty rates. Between 21 and 56 per cent of workers have had to work an unpaid trial. Fifty-one per cent of workers are not paid or are underpaid over time. Sixty per cent of workers did not have tax withheld by their employer. Forty-nine per cent have experienced off the clock violations. Thirty-nine per cent of workers have had entitlements withheld, and 17 per cent of workers have experienced unreasonable deductions from their pay.

Throughout the hearings and submissions, the committee was able to establish three overarching recommendations: firstly, the importance and need for greater oversight and regulation in a more systemic and integrated way; secondly, increased penalties for offenders, including criminalisation in extreme circumstances—this recommendation was widely supported as it was viewed reflecting community expectations for rampant theft, but as, importantly, penalties and possible gaol time would play a deterrence and education role—thirdly, streamlining the court processes, which would render wage theft and underpayment claims expeditious and cost effective.

After the committee has considered the extended terms of reference into slavery and slavery-like practices and the impacts of coronavirus, a final report will be made with further detailed recommendations. This report gives parliament a clear picture of the epidemic proportions of wage theft that have been going on in this state.

I would like to thank the research officer, Margaret Robinson, and the secretary, Leslie Guy, for working with the committee to achieve this paper. I would also like to thank each of the former and present members of the committee: the Hon. Connie Bonaros, the Hon. Emily Bourke, the Hon. Tammy Franks, the Hon. Jing Lee, the Hon. Terry Stephens and the Hon. Russell Wortley.

Debate adjourned on motion of Hon. D.G.E. Hood.

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