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Friday Workplace Briefing

Wage Theft Now – Directors and HR Managers Face Jail Time in the Future

This week Andrew and Nina examine the current wage theft laws and what this means in the future for directors and HR managers.

To view the full episode and catch up with the week’s latest news and developments please visit this link.

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About the Hosts

Managing Principal - Victoria

Senior Associate - Workplace Relations

Episode Transcript

Andrew Douglas: So let’s go onto the main topic for today which is wage theft, okay? Nina and I both wanted to talk about this, partly because there are submissions in about a new submission that’s been put by the federal government and DEWR, which is talking about what we as Australians should do around wage theft. You’re aware in Victoria and Queensland, there are specific criminalised wage theft provisions, both of which provide for 10 years for jail for intentional theft of wages and wage theft is relatively–

Nina Hoang: Yeah, deliberate behaviour.

Andrew Douglas: …relatively narrowly defined to not paying people their correct entitlements under an award enterprise agreement, whatever it is.

Nina Hoang: Contract.

Andrew Douglas: Yeah. So, that’s what wage theft is defined under the state legislation. There is no other state or territory that has a criminalising statute that exists with it. Labour made this as a platform promise when they came in federally. So the submissions came in, I think it started on the 19th, I think of April.

Nina Hoang: 13th of April.

Andrew Douglas: 13th of April. And it closed on the 12th of May. We’re not going to be making any submissions, I just thought I’d let you know, because we’re running around seeing clients. But Nina, this is… It’s sort of dramatic in a number of ways. They’ve set out a number of propositions I think from our view, I think we’re both on the same page with this. What there will be is a tiered response. In other words, intentional conduct, reckless conduct and then failure.

Nina Hoang: Yeah. They said that it could be any of the three options, but we all know it’s going to be the tiered approach. Like the government’s going to want to capture all forms of underpayment.

Andrew Douglas: Yeah. But I think the part that interests us and Nina’s got a bit more detail than I have, although she’s struggling today because it’s been a busy day, the part that I’m really interested in is cashback arrangements and deductions will be deemed to be wage theft for the purpose this… And that’s quite novel.

Nina Hoang: Yeah, that’s not in any of the existing state based legislation. And I think that’s probably the one that’s going to impact businesses the most because the businesses we work with do not purposely underpay their workers because we work with good people. But a common issue we face is when people think you can deduct for PPE, deduct for vaccines, deduct for insurance, things like that, and it doesn’t quite meet the test on the Fair Work Act to be a permitted deduction.

Andrew Douglas: And remember, under the Fair Work Act, it has to be reasonable, not for the employer, but there has to be a benefit–

Nina Hoang: It has to be for the benefit for the employee.

Andrew Douglas: Benefit for the employee. So there’s some drafting that can get around many things to assist with that, but at any time that an employee raises their hand, even if they agreed to it in contract, they can resolve from it at a later time. So getting deductions is an inherently dangerous thing. The other part is that provision under the Fair Work Act is not an old provision, it’s a new provision within the Fair Work Act and therefore historical practise prior to the Fair Work Act are making those sorts of deductions. And look, we see the most in foreign workers who have provided housing–

Nina Hoang: Labour Hire Agreements.

Andrew Douglas: Yeah, Labour Hire Agreements and things like that.

Nina Hoang: And it will now criminalise that behaviour.

Andrew Douglas: It will criminalise that behaviour. So look, I guess the issue for the two of us has been this. One, the smartest people struggle to properly analyse what awards mean.

Nina Hoang: Yeah. We struggle with it.

Andrew Douglas: Yeah, well, that’s right. That’s why Nina does that, and I don’t. It becomes even more difficult when you add an enterprise agreement above it and you add contracts above that. Okay? And that is in fact what happens in most workplaces. You have a combination of at least two of those, maybe three of those. So most payrolls are wrong. And what we’ve found with our clients are, through no intention of the client, but there will be these mistakes that occur. They’re not usually big mistakes. It’s commonly around loadings and other things like that where you have wrapped up salaries as part of a contract, which you can’t wrap up as part of an enterprise agreement or award. I want you to go back and look at those.

Nina Hoang: Yes, please.

Andrew Douglas: Please go back. And also where there is a return of cash, where someone does something and they pay–

Nina Hoang: Yeah, cashback schemes.

Andrew Douglas: Cashback schemes.

Nina Hoang: That’s going to be criminalised as well.

Andrew Douglas: I want you to think really carefully and have a look, do your own audit and go, do we have these? Then say, okay, where is my entitlement to do it? And then go to the National Employment Standards and see, it’s actually not that easy to pass the test.

Nina Hoang: Yeah, and the threshold now for underpayment under these new proposed laws, it’s not based on you having knowingly doing it. That’s one of them. So those people who purposely underpay the employees–

Andrew Douglas: That’s off to jail.

Nina Hoang: Yeah. But it will cover anyone who knows there is a significant risk of an underpayment occurring and not doing that due diligence to ensure that it doesn’t occur. And that covers so many more people.

Andrew Douglas: It does. And it’s also, the other thing is, they’re interested in courses of conduct rather than once off errors. So on the other side of it, what they’re looking for is courses of conduct because a course of conduct shows that someone has applied their mind to an issue, and they’re continuing to perpetuate that error that has occurred. So the risks for HR managers here, really, really high, okay? Again, over the last six to eight weeks, we’ve been saying that HR managers are going to get into more trouble much more easily with much more serious consequences. This is straight squarely at an HR manager, okay?

Nina Hoang: Yeah. I mean, it’s going to cover officers, but they’ll probably be covered under accessory or a liability. Especially because they’re considering criminalising any issues with like paperwork as well. Like if you are hiding pay slips, not having time sheets, falsifying records, all of that is probably going to be captured as well. Which is not in any of the states.

Andrew Douglas: So look–

Nina Hoang: Oh, I think Victoria.

Andrew Douglas: Yeah, Victoria, it is. But I think the important part is, this is going to happen, it’ll probably be six to 12 months before we see the draught of the legislation. So you’ve got this opportunity that sits there now and Victoria, by the way, you don’t have this opportunity much because the wage inspectorate is active at the moment, actually chasing stuff down, but please, go and do your audit. If you’re wrong, fix it. Fix it now. You don’t just speak to–

Nina Hoang: And don’t wait to be prosecuted.

Andrew Douglas: Yeah, just don’t wait to be prosecuted, just get it done, because in a year’s time, if you are still doing it, the effects of that’ll be very, very dramatic.

Nina Hoang: And the maximum penalties are going to be significant. They’re looking at above four million dollars, I think, and they’re looking at options, maybe having the employees pay three times whatever the underpayment was. Yeah.

Andrew Douglas: And they’re looking at jail for individuals who are involved. So remember, we’ve talked also about governance, when we see the penalising of officers, it’s operational officers, okay? It’s officers with a clear knowledge of what’s happening. This is another piece of legislation that goes towards the government’s responsibility of officers, officers making reasonable inquiries. Their failure to make reasonable inquiries, may not mean they go to jail, but it will mean they’re still liable. So we won’t have the problems we’ve got at safety at the moment where officers who get into trouble for reckless endangerment or industrial manslaughter, people are operational, the person who said climb on that roof, here, absolutely true, okay? You’re probably not going to go to jail if you didn’t make an inquiry. But if you fail to have as part of your audit process that people are being paid correctly, if you fail to follow up on a complaint that’s been raised about, look, we think things aren’t being paid properly, boy, are you going to be in some strife.

Nina Hoang: Yeah. Or if you don’t just review your contracts every year, there’s an annual wage increase, that in itself is not following your due diligence.

Andrew Douglas: No. All right. Anyway, look, I think it’s interesting. This is the second week in a row we’ve brought… Second week in a row we’ve brought changes of legislation which are coming through. There’s been a massive raft of legislation brought through by labour to hit their platform. They are going to be adopted.

Nina Hoang: Yeah. And I think, just thinking about the kind of landscape we’re dealing with, there’s a real focus now on reasonable hours. There’s all this test cases coming. If this comes into play and then you have the reasonable hours passing as well, there’s a lot of industries and businesses at risk then.

Andrew Douglas: Well, when you think about the four major industries that we act in, the average hours are all over 46 hours. So you can see where the risk is sort of sitting straight away, can’t you? Okay, let’s get on to the case study.

Nina Hoang: Okay.

Andrew Douglas: Do we look a bit battered today? We feel a bit battered today.

Nina Hoang: The lighting’s good. It doesn’t look–

Andrew Douglas: I’ve done two presentations today. One talking to camera. This is number four for me. Nina, hit it.

Nina Hoang: Okay.

Mickey was a senior salesman at Big Pools Propriety Limited (BP). BP built pools for domestic use. They sold mainly to volume builders. Kyle was the project manager at Fast Homes, a domestic volume home builder throughout Melbourne for the south eastern suburbs in Melbourne.

Andrew Douglas: Breathe.

Nina Hoang: I talk too fast.

The market was tight. Mickey’s boss, Lance, drove his team hard. Each morning they had a sales meeting where everyone’s sales targets and performance were discussed and what was needed to improve it. Mickey was the poorest performer over the last three months. He had separated from his wife and was struggling. Lance was very direct with him. Mickey hadn’t told Lance about his separation. At meetings, Lance would ask Mickey what he intended to do about his under-performance in front of others.

Andrew Douglas: There’s more.

Nina Hoang: Mickey had some anger management problems in the past. It’s part of why his wife left him. She had been subjected, she said, to mainly psychological violence, but at times that turned into physical aggression. He had choked her once, requiring emergency hospitalisation.

Mickey complained to HR about Lance’s treatment of him.

HR explained that sales always met collectively. It was a robust culture and he had to lift his game. All of them were happy to help. He just had to ask for it.

Late one Friday afternoon, Kyle met Mickey on site. Kyle was pretty upset as the pool dimensions that had been agreed were not what was being constructed. Unquestionably, this was a problem of BP, not Fast Homes, but Mickey didn’t like the way Kyle spoke. At first he said, let me look into it, but Kyle was insistent he wouldn’t let it go. Mickey’s temper started to boil up inside him and he told Kyle to F off and stormed off. Mickey had only worked at BP for 18 months.

Andrew Douglas: All right. So the questions are, was Lance’s behaviour toward Mickey in the meeting bullying? Now, can I just, before we try and answer that, say, remember, bullying is at the extreme end of misconduct.

Nina Hoang: And it’s going to be repeated.

Andrew Douglas: Yeah. But I want you to understand that it’s at the extreme end. Now, there is a case directly on this which is a banking organisation where salespeople and a bank met together, and it’s very common for sales to meet together and to have these discussions. And this was one of the very first decisions that came out and what the Fair Work Commission said at the time, look, it is repeated, it could hurt, humiliate or intimidate, and it could affect the safety at work, but it’s part of the reasonable management action of what was occurring. I don’t think that decision was terribly right, can I say?

Nina Hoang: Yeah, I don’t feel like it was–

Andrew Douglas: Remember, that’s a defence for a bullying order. But my point about this is it doesn’t matter whether it’s bullying. If it’s bullying, so be it, he can go and make his application to Fair Work Commission.

Nina Hoang: Psychological hazard though.

Andrew Douglas: It’s a psychological hazard. You know, in the Fair Work Commission over the last three years, it’s gone from 820 complaints to 780 to 602 in the last year–

Nina Hoang: Of bullying complaints.

Andrew Douglas: …and only six of which went to hearing. It’s a jurisdiction that is dying on the vine.

Nina Hoang: Oh, for stop bullying orders.

Andrew Douglas: Yeah, stop bullying orders.

Nina Hoang: Yeah, they’re useless.

Andrew Douglas: But what this really is is a safety issue. If he’s raised the complaint and what’s grown exponentially over the last two years is adverse actions where people raise a complaint or are treated unsafely and bring adverse action claim. Whatever happens here is Lance’s behaviour is bad.

Nina Hoang: Yeah, I just think that’s poor support. Yes, you performance manage someone, but you don’t do it in front of the entire team.

Andrew Douglas: No, you don’t.

Nina Hoang: And it doesn’t sound like he’s doing it to anyone else, so there’s no organisational justice there.

Andrew Douglas: Yeah. Okay, so let’s move on. Did Lance and/or BP act in breach of safety law? And if so, what was the breach and who would be liable? So we’ve agreed now it’s already a breach of safety law. It’s certainly a breach of primary duty, which is providing a safe place of work. Does it get higher than that? Well, the answer for Lance is, it’s definitely in breach of Section 25. By the way, Section 25.

Nina Hoang: Yes, I know.

Andrew Douglas: I just thought I’d raise that, not 26. 25.

Nina Hoang: Duty towards other employees, yeah.

Andrew Douglas: Duty towards other employees.

Nina Hoang: But I don’t think it would go further than that.

Andrew Douglas: Yeah, I don’t think it’s going to be… I don’t think anyone’s going to prosecute. What I do think though is, it is unquestionably at the very beginning, as you’ve said, of psychological hazards, he treats one person differently to others. Unacceptable. He places pressure in front of people, in front of others. So it’s a psychological hazard.

Nina Hoang: But also, it’s an interesting scenario, Andrew, because Mickey is also not a stellar employee. It’s not a situation where–

Andrew Douglas: No, Mickey’s a bum. Mickey’s not a stellar employee. Mickey’s hopeless.

Nina Hoang: Yes. So, it’s this difficult situation where you have a bad employee, the answer is not to be bad back.

Andrew Douglas: No, that’s right.

Nina Hoang: Two wrongs don’t make a right and you can performance management.

Andrew Douglas: I wasn’t expecting biblical stuff. I’m just saying.

Nina Hoang: You can performance manage them and if it had been done reasonably, then he wouldn’t be at risk under any of the laws.

Andrew Douglas: No, that’s exactly right. Anyway, so let’s go on. Three. Mickey went to see his doctor and put in a worker’s compensation for psychological stress from the bullying, would he be successful? The answer is, absolutely, because it’s not reasonable management action. It was performance management.

Nina Hoang: For the stuff, yeah.

Andrew Douglas: Yeah, so again, if he’s got a psychological injury, that is, if he is injured and there’s a diagnosis that goes with it, was the management of him, was it reasonable for there to be management? Yes. So there’s a tick for the first part of regional management action, which I can hardly say, was it done in a reasonable way?

Nina Hoang: No.

Andrew Douglas: No. So the claim would be accepted. Now, can you start to see how expensive this gets?

Nina Hoang: Yeah. Would it have been different if they were still having the same conversations, Lance was still riding him about everything, but he did it in a private room?

Andrew Douglas: No problem at all. No problem at all. Probably workers’ compensation looks at such a gumby law, if he didn’t offer him a support person, if he didn’t hold his shoulder, well, I don’t know, but there’s a lot of risk in workers’ comp. But I think you’re right. If he had have said to him, look, these are your performance issues, this is what good looks like, what support do you need? If it was documented and well done, it’d be reasonable management action every time.

Nina Hoang: There’s a slight difference, saves you a lot of money.

Andrew Douglas: It does. Okay, next question.

Nina Hoang: Is that it?

Andrew Douglas: This is moving as slow as our brains. It’s great, isn’t it?

When Mickey got back to the office, Kyle had rung Lance. Lance then called Mickey into an office and asked him why he shouldn’t terminate his employment for serious misconduct. Mickey explained what happened and Lance then terminated him. Would Mickey have a successful claim for unfair dismissal?

Nina Hoang: Yeah, there was no proper process.

Andrew Douglas: Well, I think also swearing at somebody on a building site’s not enough to terminate anybody, when you think about–

Nina Hoang: Right, and to walk off, yeah. I think he did it… I read it that he did it as a way so that he wouldn’t result in violence. He was really–

Andrew Douglas: Controlling his own… That guy just didn’t know how lucky he was.

Nina Hoang: So, he was learning from his anger management.

Andrew Douglas: Okay, we’re going to do this early in the morning next time. But my point about it is, I don’t think there’s a valid reason.

Nina Hoang: I don’t think there’s a valid reason. There’s no procedural fairness. .

Andrew Douglas: But for procedural fairness, there’s not even a valid reason. So I think the answer is he would succeed. As part of the show cause interview, Lance said you are just too difficult to manage, always full of complaints, I want to put it.

Nina Hoang: This is the case.

Andrew Douglas: Would Mickey have been successful in general protections claim?

Nina Hoang: No, because that’s not the reason why he was being terminated.

Andrew Douglas: Could you actually expand on that a bit for our viewers out there?

Nina Hoang: The reason he’s being terminated is because of that final incident. If Lance has the evidence to support that, which he walked off and he said, why did you walk off and why did you swear at them? And then he, what your question says, that, oh, he explained why and then he fired him, then I think, yeah, that supports that it wasn’t for that reason. The other complaint–

Andrew Douglas: But I guess–

Nina Hoang: It’s a reverse onus.

Andrew Douglas: The other thing I’ll just put in there is this. Sometimes you say dumb stuff when you’re under pressure and when you’re actually dealing with a situation where you’re thinking and terminating, stuff comes out of your mouth because your anxiety levels are high. And the fact is, Mickey had raised complaints about Lance. We know that and about the manner in which Lance had treated him, and therefore, it could be that part of what was activating Lance’s mind was the fact where you’ve complained about me, and this is my opportunity. So I agree with Nina. What Nina said is on the facts that we have… Pardon. The facts we have here, what activated Lance’s mind to terminate him was his misconduct.

Nina Hoang: Yeah, because it has to be a substantial and operative reason. That being said, Mickey would file the claim and it makes it more difficult the fact that he said that. So it’s not a sure thing either way, but yeah, I still think–

Andrew Douglas: So, look, I come back to something you and I repeatedly say, which is, when you’re going into a meeting to deal with discipline, please plan properly beforehand. Please be aware that your anxiety levels are going to be high. You’re a good person, your emotions are going to be high, know what you are going to say when you go in there and try and stay along.

Nina Hoang: Yeah. And if you feel that you’re getting swept up in it, just take a break. Take five minutes, step outside, collect yourself and come back in and get it done right.

Andrew Douglas: Look, I don’t believe there’s any other questions and I wrote this. So there you are. Thanks for coming, for running to get here. That was really impressive. Thank you, everyone.

Nina Hoang: Thank you for joining us.

Andrew Douglas: And putting up with us.

Nina Hoang: And please put a thumbs up–

Andrew Douglas: Thumbs up, please.

Nina Hoang: -to do with the fun episode.

Andrew Douglas: See you later, bye-bye.

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