Tough new penalties for wage theft will be reserved for the most serious breaches to prevent employers being criminalised for “genuine mistakes”, Christian Porter has said.

On Thursday, the attorney general launched the first of two discussion papers of his review into industrial relations, a policy area that has long been a third rail for the Coalition since Labor capitalised on the unpopularity of the Howard government’s WorkChoices reforms to win the 2007 election.

The release of the papers comes as the Morrison government’s decision to reintroduce a bill for a proposed amnesty for employers who failed to pay superannuation reignited an argument with unions who accuse the Coalition of letting law-breaking employers off the hook.

 We might laugh at sushi pizza but wage theft can be a deliberate business strategy

In addition to tougher penalties to crack down on persistent underpayment and exploitation of employees, the first discussion paper raises the possibility of increased penalties for incorrectly classifying employees as independent contractors, a common way for employers to escape paying entitlements.

The second paper proposes lifting the four-year cap on wage deals for new work sites, responding to employer concerns that unions are able to hike costs when agreements expire mid-way through major projects.

Scott Morrison has already publicly committed to criminalise wage theft but the paper will give unions and employer groups a chance to have input into a regime of new criminal penalties.

Porter told the Committee for Economic Development of Australia the Coalition is seeking industrial relations reforms that are “actually possible” because they can “can achieve a significant enough degree of consensus that they can be supported through parliament”.Advertisement

He said that reforms need to “create jobs and put upward pressure on wages to benefit workers, “help business by boosting productivity” and help the economy grow overall.

The discussion paper argues that underpayment denies employees legal entitlements, providing an unfair advantage to law-breaking employers at the expense of “the overwhelming majority of employers who are trying to do the right thing … competing against those that underpay or exploit workers”.

The migrant worker taskforce found underpayment of foreign workers in Australia is systemic, which the Grattan Institute has suggested could contribute to poor pay growth for all workers at the bottom end of the labour market.

Porter said the government “is committed to introducing strong and effective criminal sanctions to help stamp out deliberate and systematic wage theft by Australian employers”.

“These new criminal penalties should rightly apply only to the most serious types of offending where there is clear evidence of persistent or repeat offending, or offending on a significant scale,” he said. “We are taking this consultative approach because we recognise that the industrial relations system is complex and we need to ensure that any new penalty regime is fit for purpose and avoids any unintended consequences.

“For example, we do not want employers who make genuine mistakes and move swiftly to rectify them to end up with a criminal record.”

At a doorstop, Porter told reporters that harsher penalties are more appropriate when underpayment is large, sustained, and “there is a level of knowledge that is very high” where employers knew or could be inferred to know of the breaches.

The most comprehensive study of wage theft and working conditions among temporary migrants in Australia has found almost a third earned $12 an hour or less, approximately half the casual minimum wage.

Australia has been rocked by a series of underpayment scandals, from 7-Eleven staff forced to pay back part of their pay to undercut minimum wages to $7.8m of underpayments by celebrity chef George Calombaris’s restaurants.

While employer groups bristle at the suggestion that underpayment constitutes “wage theft”, unions have used the label to push for tougher penalties for law-breaking employers while the government pursues changes to toughen disqualification and deregistration penalties against unions.

 The government’s wages growth predictions appear to be wishful thinking

The paper suggests that sham contracting – existing provisions in the Fair Work Act that ban misclassifying workers – could also be reformed by creating a separate category for serious or systemic cases, with higher penalties.Advertisement

It questions whether the existing defence of reckless misclassification of workers should be reformed.

On Wednesday, the Coalition reintroduced legislation for a one-off amnesty for employers who failed to pay superannuation.

The assistant minister for superannuation, Jane Hume, said the bill will “help hardworking Australians receive the superannuation they have earned” by incentivising employers to “come forward and do the right thing” in return for waving the usual penalties.

“Employers will not be off the hook – to use the amnesty, they must still pay all that is owing to their employees, including interest.”

The Australian Council of Trade Unions assistant secretary, Scott Connolly, said the amnesty “will not recover the billions which have been stolen from workers since the beginning of the superannuation system”.

“If the Morrison government [were] serious about ending theft of superannuation it would increase enforcement, penalties, and allow unions back into workplaces to inspect pay records and to initiate recovery action against employers,” he said.

Extracted from The Guardian