What is wage theft in Australia?

Wage theft, a term increasingly prevalent in Australian industrial relations discourse, represents a broad spectrum of unlawful workplace practices.  The practice is endemic in Australian workplaces, demonstrated recently via the McKell Institute’s report Billion Dollar Burden: The Unfinished Business of Wage Theft Reform.

The report estimates that over $1 billion a year is stolen from Australian workers, based on Fair Work Ombudsman auditing dating back to 2009.

• The Definition and Scope

Wage theft encompasses a range of illegal activities, including underpayment of wages, non-payment of overtime, and denial of entitlements like leave or superannuation. Legally, these practices contravene the Fair Work Act and other employment laws, imposing significant penalties on offending employers. 

• Prevalence and Case Studies

Recent years have seen a surge in identified cases of wage theft across various sectors in Australia. High-profile cases such as the underpayment scandals involving major retail chains have highlighted the systemic nature of this issue. Moreover, investigative reports have brought to light the widespread exploitation in industries like hospitality and agriculture. 

Some of the highest profile instances of wage theft in the last few years include:

Dominoes Pizza – Underpaying tens of thousands of staff, paying them significantly less than minimum wage

Din Tai Fung – Faking payroll documents to deliberately underpay staff

85 Degrees Coffee – Exploiting visa workers to pay them close to 1/3 of the award wage, stealing over $50,000 per staff member

Melbourne University – Underpaying over $30 million to casual staff over a decade. Sadly Melbourne University isn’t alone in the tertiary education sector in systematic wage theft, with the NTEU placing the total wage theft bill across the industry at over $100 million.

The ACTU in 2022 noted “Overall, that’s about 13 per cent of the total workforce and as much as 21 per cent of employees in high-risk industries such as construction, healthcare, retail, accommodation and food service”

• Manifestations of Wage Theft

Wage theft manifests in diverse forms, from subtle discrepancies in payroll to blatant exploitation. Common examples include misclassifying employees to avoid paying correct wages, manipulating time sheets, and intentionally misunderstanding or ignoring industrial awards. These practices not only financially harm employees but also undermine fair competition in the market. Workers often experience wage theft via unpaid penalty rates, unpaid overtime and the denial of benefits.

Unions NSW long advocated for the abolishing of “piece rates”, a payment scheme most common in the agricultural industry that allowed for systematic wage theft by paying workers based on the weight or volume of produce they picked. The volume of picking required to make minimum wage was usually impossible, which was then layered with other forms of exploitation and intimidation on a workforce containing high numbers of Visa workers. You can read our report here, and see the AWU’s response to the implementation of a minimum rate for pickers here, effectively ending this form of wage theft.

• Impact on Workers and Economy

The consequences of wage theft extend beyond individual financial losses. It contributes to broader economic and social inequities, affecting the standard of living and undermining trust in the employment system. Furthermore, it places ethical businesses at a competitive disadvantage, distorting market dynamics. Recent reporting indicates that instances are at a record high, with young workers especially at risk of exploitation.

• Legal Recourse and Employee Advocacy

Employees victimised by wage theft have legal avenues for recourse, such as lodging complaints with the Fair Work Ombudsman. However, the complexity of legal processes often deters individuals from pursuing claims. There is a growing call for more robust enforcement mechanisms and increased awareness among employees about their rights. The McKell Institute points to the Victorian Government’s Wage Inspectorate as ‘highly effective in both deterring wage theft, and identifying cases of wage theft’, indicating that state level responses can be effective in curbing the issue, however a national unified approach is still needed to deal with the ‘persistent economic injustice’ in Australia.

Wage theft in Australia is a multifaceted issue, deeply entrenched in various sectors. It demands a concerted effort from legal institutions, employers, and employees to address and eradicate. Strengthening legal frameworks and enhancing workforce education are pivotal in combating this endemic problem. 

One of the most important things workers can do to combat wage theft is participating actively in their workplace by joining their union. Union members enjoy better protections from wage theft and can most often access their union’s wage theft recovery services. The ACTU notes:

“in nearly every case of wage theft discovery, investigation and recovery, unions are behind it.

Unions provide a range of services to ensure that you can recover the wages stolen from you. Compared with other recourses for wage theft (such as HR, Fair Work and even legal advice), unions are typically the least costly and most successful in aiding workers to recover their stolen wages.”