Election: Which party has toughest penalties for underpayment of workers?

Back in February, we posted a Blog about a new Labor policy that threatened employers who “intentionally or recklessly underpaid an employee” with a penalty of up to two years in prison. Not surprisingly, the Blog generated a lot of interest.

Following Labor’s announcement, the Coalition Government recently announced a new policy containing tough new penalties for employers who underpay workers.

So what’s on the table in the lead up to the election?

The Coalition’s policy includes the following elements:

  • Increasing maximum penalties (by 10 times the current $54,000 amount) for employers who deliberately underpay employees and fail to keep employment records;
  • Creating a new offence for employers who pay employees correctly, but demand employees re-pay a portion back to the employer in cash;
  • Amending the Fair Work Act to make franchisors and parent companies liable for breaches of the Act by their franchisees or subsidiaries in situations where they should reasonably have been aware of the breaches and could reasonably have taken action to prevent them from occurring;
  • Granting compulsory evidence gathering powers to the Fair Work Ombudsman (similar to those currently held by the ASIC, the ACCC, the ATO and other regulators) to enable the FWO to gather evidence where proper records do not exist;
  • Introducing new penalty provisions relating to the obstruction of Fair Work Inspectors and the provision of false or misleading information to Fair Work Inspectors; and
  • Creating a migrant workers taskforce within the FWO.

Labor’s policy includes the following:

  • Higher penalties for employers who underpay workers, including up to 2 years’ imprisonment for employers who deliberately or recklessly underpay workers;
  • Higher penalties, including up to 2 years’ imprisonment, for employers who deliberately engage in “sham contracting” or deliberately exploit temporary overseas workers;
  • Introducing a statutory test to define an “independent contractor” rather than relying on the common law;
  • Addressing “phoenixing” of business entities as a mechanism to avoid liability, by making Directors personally liable for outstanding debts and wages owed to employees;
  • Enabling temporary overseas workers who are working illegally to pursue claims under the Fair Work Act;
  • Requiring employers to provide an information pack to temporary overseas workers.

After the election, Ai Group intends to consult with the party that wins Government about the implementation of its policy. We will press for any new laws to be balanced and fair to all parties, including employers. Ai Group opposes jail terms for employers who underpay employees. Underpayments are often the result of payroll errors or uncertainties with award interpretations.

What’s your take on the policies of the two major parties on this issue? Is this something that could influence your vote? Share your thoughts and start a conversation by leaving a comment below.

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Ai Group's Head of National Workplace Relations Policy, Stephen Smith is responsible for workplace relations policy development and advocacy. He regularly represents industry’s views to governments and opposition parties, and in numerous inquiries and major cases. He is Special Counsel for, and Chairman of the Board of, Ai Group Workplace Lawyers, a national law firm operated by Ai Group.

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