[P.P. 246 Parliament of South Australia _______________________ INTERIM REPORT OF THE SELECT COMMITTEE ON WAGE THEFT IN SOUTH AUSTRALIA _____________________________________________________________________ Laid on the Table of the Legislative Council and ordered to be printed on 21 July 2020 _____________________________________________________________________ Second Session, Fifty-Fourth Parliament, 2020 CONTENTS 1. The Select Committee 1.1 Appointment 4 1.2 Membership 4 1.3 Meetings 5 2. Overview of evidence 5 3. Background 6 4. The Inquiry 4.1 Term of reference (c) 7 4.2 Term of reference (f) 12 4.3 Term of reference (a) 18 4.4 Term of reference (e) 23 4.5 Term of reference (b) 28 4.6 Term of reference (d) 31 4.7 Term of reference (g) 34 4.8 Term of reference (h) 37 4.9 Term of reference (i) 43 5. Acknowledgements 44 Appendix 1: List of witnesses 45 Appendix 2: List of submissions 47 Appendix 3: Rate of Wage Theft by Fair Work Ombudsman 48 National Campaigns, McKell Institute 1. Select Committee on Wage Theft in South Australia 1.1 Appointment The Legislative Council established a Select Committee in October 2018 to inquire into and report on wage theft in South Australia, with particular reference to – (a) The prevalence and incidence of wage theft in South Australia, with acknowledgement to evidence of wage theft from other parts of Australia; (b) The impact of wage theft on workers, families, law-abiding businesses, the economy and community; (c) The various forms that wage theft can take, including through unpaid superannuation and any other statutory entitlements, the misuse of ABNs and sham contracting arrangements; (d) The reasons why wage theft is occurring, including whether the current regulatory framework and practises are effective for deterrence; (e) The sectors in which wage theft is prevalent, including industries, occupations, parts of the state, or among cohorts of workers; (f) The effectiveness of the current regulatory framework at State and Federal level in dealing with wage theft and supporting affected workers, including whether conditions preventing prosecution of white collar fraud are fundamental towards supporting the legality of wage theft; (g) Measures to ensure support services are in place to guarantee accessible and cost- effective justice to expedite claims; (h) Options for ensuring wage theft is eradicated, including consideration of regulatory and other measures either implemented or proposed in other jurisdictions interstate, nationally or internationally and the role of industrial organisations, including unions and employer registered bodies in addressing and preventing wage theft; and (i) Any other related matter. 1.2 Membership Hon Irene Pnevmatikos MLC (Chairperson) Hon Connie Bonaros MLC Hon Emily Bourke MLC (until 18 June 2019) Hon Tammy Franks MLC Hon Jing Lee MLC (from 18 February 2020) Hon Terry Stephens MLC (until 18 February 2020) Hon Russell Wortley MLC (from 18 June 2019) Secretary Ms L Guy Research officer Dr M Robinson 3 1.3 Meetings The Select Committee advertised for interested persons to provide written submissions or to register an interest in appearing before it. The Committee met on 16 occasions to hear evidence. A list of people who appeared before the Committee is in Appendix 1. The Committee received 24 written submissions, which are listed in Appendix 2. The Select Committee intended to travel to various regional areas to hear evidence and as such visited the South East. However, while the Committee was preparing to travel to the Riverland unfortunately the COVID-19 pandemic prevented further exploration of the issue in additional regional areas of South Australia. 4 2. Overview of Evidence Australia has long been lauded, with an element of pride, as the “land of the fair go”. Evidence before the Committee, however, challenged that egalitarian notion of fairness, justice and equal opportunity. The Committee heard details of widespread exploitation of workers who had been deprived of wages, superannuation and other entitlements, those who were subject to intimidation, loss of employment and, for some, their visa status, leading to deportation. Despite this information, those representing the commercial sector disputed the very concept that workers were being so misused. During the course of the Inquiry, however, it came to public notice that multiple large organisations had been significantly underpaying their staff. From the outset, the very term “wage theft” generated protest. Some business organisations and peak bodies criticised “theft” as being highly emotive, inaccurate, inappropriate, one with an assumption of injustice that improperly branded employers as criminals when they mistakenly underpaid their employees. Some businesses argued that “non-compliance” was more pertinent, as instances of underpayment do not generally stem from intent to deprive workers. Rather, non-compliance is due to employers incorrectly interpreting their obligations, given the large number of laws that govern employment, and clauses in modern awards and enterprise agreements that are often complex or vague, requiring interpretation by employers who mostly lack legal training. Some denied that current research confirmed the existence of broad scale wage non-compliance. As such, business representatives commended the effectiveness of the current regulatory system under the Fair Work Act and the role of the Fair Work Ombudsman, deeming the existing support services to be accessible and cost-effective for both employers and employees. They opposed the introduction of any new legislation in South Australia, as well as any change to the current industrial framework, while decrying the suggestion that wage theft, or wage non-compliance, should be criminalised. Evidence of the prevalence of wage theft, however, came from exploited workers, trade unions, researchers, community legal services and support centres, multicultural organisations and youth groups. They provided data, numerous case studies and examples detailing underpayment of wages, unpaid superannuation, allowances, penalties, and leave entitlements, along with manipulation of hours, time sheets and contractual arrangements. In their view, wage theft is virtually the norm, forming the basis of a business model. Despite presenting as an epidemic, wage theft is being fought on a singular basis with vulnerable people, with it falling to individual employees to identify anomalies when the onus should be on employers. Apart from challenging the very notion of awards being too difficult to interpret, many countered that ignorance of the law is not an acceptable defence. In such an environment, workers refrain from complaining for fear of losing their jobs and repercussions on future employment. Temporary migrant workers and international students, often paid only half the award rate, work excessive hours in breach of the terms of their visa, with the prospect of deportation. The common call was for employers engaged in deliberate and systematic wage theft to face criminal penalties. While most acknowledged the role of the Fair Work Ombudsman (FWO), it was generally allowed that the FWO was under resourced and lacked front line staff to police existing legislation; as such, there was little chance that the majority of businesses would ever be audited. In addition to accounts of the societal impact of wage theft and reasons for its occurrence, the Committee received a wide range of recommendations for its eradication. 5 3. Background In September 2018, the Hon. Irene Pnevmatikos moved a private member’s motion in response to the escalating prevalence of wage theft in Australia, citing a range of fraudulent behaviours by some employers that impact on workers, their families, law-abiding businesses, the community and the economy. Approximately 2.4 million or one third of eligible Australian workers are underpaid, with some $3.6 billion being stolen each year; the process to recover entitlements is both costly and difficult, acting as a deterrent to those who seek redress. She called for the Government to ensure that the regulatory frameworks currently in place effectively support the State’s workers who deserve justice. In October 2018, the Hon. Connie Bonaros supported the motion, stating that wage theft is rife in Australia. She offered statistics from Kronos, a global workforce management provider, showing: 10 per cent of Australian workers, about one million people, have rarely or never received the minimum wage; 11 per cent are not paid for all the hours they work; and 43 per cent have, at some point, been paid less than the minimum wage. Moreover, it is the vulnerable members of the workforce who experience the worst form of wage theft – those with disabilities, young people and migrant workers – in the worst affected industries, hospitality, retail and agriculture, where most jobs are casual. The Hon. Kyam Maher offered further support, arguing that wage theft in large organisations is not accidental, nor is it an administrative error; it is a business model employed to increase profits at the expense of hardworking people. Wage theft occurs across the economy, industries and society, as well as geographically across the State. If the current laws are found to be inadequate, change must occur. The Hon. Tammy Franks showed that while the Fair Work Ombudsman completed 26,917 requests for assistance and recovered more than $30.6 million in the 2016-17 financial year, only 55, or 0.2 per cent, of those requests went to court.