Labor party proposals to criminalise wage theft in Victoria and NSW are under question, with research warning the strategy might be unconstitutional.
In their research paper, Melissa Kennedy and John Howe from the University of Melbourne raise serious questions about whether a new criminal offence would deter employers from underpaying workers. They warn the proposed state laws could face a constitutional challenge over a potential inconsistency with federal laws, including the Fair Work Act.
Professor John Howe is Director of the University of Melbourne School of Government and was previously co-director of the Centre for Employment and Labour Relations Law at the Law School. Melissa Kennedy is a research assistant at the School of Government.
“A constitutional challenge could be argued on the basis that federal laws already ‘cover the field’, resulting in any attempts by the states to regulate industrial relations as being ruled inconsistent with the federal scheme and held to be invalid,” Kennedy and Howe say.
Melissa Kennedy told The Sydney Morning Herald and The Age there were a number of practical and legal hurdles that may undermine the effectiveness of criminalisation. She said constitutional issues “appear to be a significant roadblock that will prevent any state governments from successfully enacting state based criminalisation laws”.
“Research suggests that the deterrent effects of criminalisation are unlikely to be anywhere near as effective as suggested due to difficulties associated with obtaining convictions and the limited resources that are available to bring prosecutions,” she said.
The researchers acknowledged that while criminal liability has “great appeal”, civil penalties were more practical. The state laws may also “actively harm” the efforts of the Fair Work Ombudsman (FWO) to recover entitlements for workers.
“At a practical level the model proposed by the Victorian State Government is not appropriate to achieve the goals proposed as a regulatory tool,” the research paper says.
“Fragmented responses and overlapping jurisdiction with the FWO will inevitably cause difficulties with enforcement and will undermine the civil regulators objective, which has the potential to result in less effective regulation.
“Further, it is unclear whether the criminalisation of wage theft has the capacity to lead to increased specific and general deterrence in a manner different to what civil penalties can achieve. As such, criminalisation at a state level as a compliance strategy is ill-advised.”
Relatively few criminal prosecutions are successful because they can be costly and require a high standard of proof and evidence. They are also difficult for victims.
A criminal charge can be hard to prove if the employer was unaware of the exact terms of an award or enterprise agreement or if the underpayment was not carried out by the employer, for instance the employer did not organise payroll.
The assumption that a criminal offence creates a greater deterrent effect than existing civil penalties relies on a rational consideration of harms and risks of prosecution. Studies have found the prospect of imprisonment has a small deterrent effect.
“If there are only a few successful prosecutions and few investigations, it is unlikely that the existence of criminal sanctions will have a deterrent effect sufficient to bring about the changes to business and employer behaviour as hoped by supporters of a criminalisation model,” the researchers said.
The Fair Work Ombudsman and state inspectorates would need to collaborate and difficulties might arise in matters that crossed over both civil and criminal jurisdictions.
The Australian labour relations system provides civil remedies for the breach of employment standards. Criminal offences have mainly been reserved for work health and safety regulation and contempt of court.
The 7-Eleven wage theft scandal and others revealed by The Sydney Morning Herald and The Age, have raised concerns about the systemic underpayment of vulnerable workers.
The Victorian Labor Government and the NSW Opposition have announced they would introduce tough penalties including heavy fines and jail terms to ensure the underpayment of workers is punished with more than “a slap on the wrist”.
The researchers conclude that it would make more sense to criminalise wage theft at a federal rather than state level “thereby creating a hybrid regime for employment standards enforcement”.
“To effectively reduce non-compliance, a co-ordinated approach utilising civil and criminal sanctions at federal level is likely to be most appropriate,” Ms Kennedy said.
NSW ALP industrial relations spokesman Adam Searle said criminalisation of wage theft was just one part of the Opposition’s strategy to tackle the issue.
“We recognise this is a complex problem,” he said.
“I’m pretty confident that a state wage theft criminal law would stand up to constitutional scrutiny,” he said. “We are talking about changing the conversation and … calling theft for what it is.
“That is not a substitute for the range of other active measures … to help workers recover what they are owed.”
NSW Labor’s policy also includes holding head franchisors accountable for the actions of franchisees and a licensing scheme for labour hire companies to force compliance with existing labour laws.
Stephen Smith, Australian Industry Group head of national workplace relations policy said criminal penalties were not appropriate for wage underpayments.
“The Fair Work Act contains very hefty civil penalties for wage underpayments. The penalties were increased by up to 20 times last year,” he said. “Therefore, any view that the previous penalties were not tough enough has already been very comprehensively addressed.
“Any civil case relating to back-pay would be put on hold by the Courts until the criminal case is heard and determined. Therefore, workers would be waiting years for back-pay.”
Victorian Attorney-General Jill Hennessy said the existing legal regime has failed to prevent underpayment of workers in low paid industries such as hospitality.
“The new laws will be drafted carefully to address any potential constitutional inconsistency issues,” he said.
Extracted from MSN