Wage theft hurts workers and economy

Until quite recently the expression ‘wage theft’ was not part of our lexicon.  Theft was a term almost exclusively reserved for (blue collar) criminals, for pick pockets, banks robbers, fraudsters and con artists. You know, the ‘real crims’!  But it has been the rampant proliferation of high-profile businesses and celebrities involved in the substantial underpayment of their stereotypically low paid and vulnerable workers, which has energised a campaign to criminalise (white collar) underpayment of wages.

The 7-Eleven Scandal

The 7-Eleven scandal has been estimated to involve up to $300 million in the underpayment of wages by franchisees.[1] Systems administered by franchisees to avoid minimum legal obligations, such as falsified time and wages records and kicking back half your pay packet to the employer, were widespread, and yet the franchisor incredibly claimed ignorance.  According to the franchisor, defying any credible explanation, this unconscionable conduct went completely undetected. Meanwhile thousands of typically young and vulnerable international students and temporary visa holders were paid half the minimum wage and, with some were paid much less.

MasterTheft

Since this scandal erupted there has been a growing series of revelations of other high-profile businesses and individuals which have been involved in colossal underpayments, including most recently the celebrity Masterchef, George Calombaris, who has admitted to underpaying his staff by $7.8 million.[2] It seems clear that George’s culpability in ripping off his hard-working restaurant staff is intermixed with his leading role advocating for cuts to restaurant staff wages and conditions.[3] 
Further infuriating workers and their unions was the paltry fine of $200,000 imposed on Calombaris for this conduct, which represents just 2.5% of the total sum underpaid. The relative size of this penalty is hardly a disincentive to unscrupulous employers which underpay their staff.

Prevalent and Pervasive

Arising from these high-profile cases and the increased awareness of the prevalence of underpayments across the economy, a debate has emerged about how to cure this growing cancer in our workplaces.  In our retail and fast food industries, anecdotal evidence suggests that around one in five employers are not even paying minimum base rates of pay. I invite you to have a chat with workers, especially young workers in non-union workplaces, about their base rates of pay. You may be surprised at how much they are paid! In addition to the underpayment of base rates, there is an extensive shopping list of common infringements, including:

  • Not being paid weekend, evening and public holiday penalty rates
  • Not being paid overtime rates
  • Not being paid uniform, meal break and first aid allowances
  • Not being paid the attend team meetings
  • Not being paid to complete training modules (e.g. online at home)
  • Work performed before or after rostered shifts to balance cash registers and complete serving customers

These issues can affect union and non-union workplaces alike, but a strong union presence and activity in a workplace is the best protection and deterrent against #WageTheft.

Complexity or greed?

Some conservative politicians, employers and their hard right-wing (un)think-tanks have asserted that #WageTheft is caused by the complexity of Awards and the Australian industrial relations system.  This is utter drivel and is simply code to justify further cuts to wages and conditions. There are two obvious reasons for snubbing this nonsense.  Firstly, over the last decade any complexity has been substantially reduced with the Fair Work Commission, and its predecessor, reducing the number of Awards from 3323 instruments to as few as 122 modern awards. This has coincided with the increased prevalence of increasing #WageTheft, which strongly suggest there is no causal relationship between #WageTheft and systemic complexity.  Secondly, if complexity was the issue, rather than simply unethical conduct and outright greed, you would expect the number of overpayments to match the number of underpayments.  Yep, that’s right. The sound of crickets chirping in the background also strongly suggests that complexity is not the culprit.

Hurts good bosses and the economy too

It is vital to appreciate that #WageTheft is not only an issue for those workers, denied their minimum, lawful entitlements, and their families but it is also a significant issue for good employers. If law-abiding employers are forced to compete on unfair terms against those shirking the law, it generates an uneven and uncompetitive playing field. Good employers have skin in this game too as they are forced to reduce costs in other ways, e.g. cutting hours and reducing service, to compete with dodgy operators.  Finally, the less money in the pockets of ordinary workers, the less money there is to recycle into the economy, and as a result shops, cafes and restaurants will have less custom.  The virtuous circle, which drives our economy, depends on paying decent wages and conditions which are then pumped back into businesses to drive growth, profitability, better hours and better wages. #WageTheft is a handbrake on our economy that we cannot afford.

Lock ‘em up?

The term #WageTheft has been very useful in bringing this conduct into sharp focus. There will be a debate about the criminalisation of this conduct and much of it will focus on the level of culpability of the employer.  Was the conduct intentional, reckless, negligent or simply ignorant? And where should we draw the line? Much of this debate, unfortunately, misses the real point.

Restore rights and court powers

The rising incidence of #WageTheft has coincided with, and in my view has been facilitated by, successive neo-liberal governments winding back the power of unions to do their job.  The ability to enter premises and inspect the time and wages records of employers, without navigating a complex web of regulation and restrictions calculated to limit legitimate and responsible union activity, is fundamental to restoring fair workplaces. Access to courts to recover wages and to enforce minimum rights has also been complicated through the rationalisation of court structures, the elimination of the Chief Industrial Magistrate’s Court (in NSW) and lack of a quick and easy, specialist, no cost, small claims jurisdiction, so that workers and their unions can cheaply and easily pursue claims and recover what is owed.

The Government watchdog, the Fair Work Ombudsman, does an admirable job with limited resources and personnel, but it is no replacement for an army of well-trained, motivated and knowledgeable union officials who know and understand their industry and can quickly identify and ferret out misconduct. The focus of the discussion is likely to be on the drama and appeal of putting bad bosses behind bars, but we cannot miss the main game.

Minimum Wages Table

[1] Revealed: How 7 Eleven is ripping off its workers, Sydney Morning Herald https://www.smh.com.au/interactive/2015/7-eleven-revealed/

[2] George Calombaris's MAdE Establishment underpaid workers $7.8 million, ABC https://www.abc.net.au/news/2019-07-18/george-calombaris-made-establishment-backpays-underpaid-workers/11320274

[3] MasterChef slams Fair Work pay rates, Sydney Morning Herald https://www.smh.com.au/national/masterchef-slams-fair-work-pay-rates-20120109-1pri2.html

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