Bosses who underpay their workers to face jail

Employers that deliberately underpay their workers could face a stint in prison as part of a radical national suite of reforms designed to stamp out worker exploitation and systemic wage fraud plaguing industries across the country.

The 22 proposed reforms, outlined in a report to the federal government by the Migrant Workers' Taskforce due to be released on Thursday, include a root and branch review of the work place regulator, stiffer penalties and improved remediation processes for underpaid workers.

Kelly O'Dwyer backs 22 recommendations to stamp out wage fraud.Credit: Dan Himbrechts

The report also called for the government to establish a national registration scheme to track labour hire firms, particularly in the high-risk industries of horticulture, meat processing, cleaning and security. The scheme would have the power to cancel registrations if the labour hire firm is caught breaking the law.

Other recommendations include banning employers from employing visa holders for a specified period if they have been convicted in court of underpaying foreign visa holders.

Jobs and Industrial Relations Minister Kelly O’Dwyer said the government accepted in principle all 22 recommendations.

“The Coalition government has no tolerance for those who repeatedly and deliberately underpay workers, whether they are an Australian or a worker on a visa. For the very first time we will introduce criminal sanctions for the most serious and egregious forms of deliberate exploitation of workers,” she said.

There was much publicity concerning 7-Eleven franchisees, but demonstrably the problem was more widespread.

Report of the Migrant Workers' Taskforce released on Thursday

The inquiry was sparked by a spate of underpayment scandals exposed by the Sydney Morning Herald and The Age including at well known companies such as 7-Eleven, Domino’s Pizza, Pizza Hut, United Petroleum, Appco, Caltex and Retail Food Group.

Victorian Premier Daniel Andrews has already pledged to make his state the first one to criminalise wage fraud.

Ms O’Dwyer said the government recently boosted funding for the workplace regulator, the Fair Work Ombudsman (FWO).

Professor Allan Fels, who spearheaded the migrant taskforce and co-wrote the report with Professor David Cousins, the deputy chair of the taskforce, said wage fraud was widespread and had become more entrenched over time.

Professor Allan Fels says implementing the recommendations in the report would make a significant difference to foreign workers.Credit: Alex Ellinghausen

He said the implementation of all 22 recommendations would make a significant difference to worker exploitation.

"Wage theft has been getting out of hand," he said.

He said it was worse than consumer exploitation and in the more egregious cases needed the full force of the law, including prison sentences.

“Wage exploitation of temporary migrants offends our national values of fairness,” he says in the report.

“It harms not only the employees involved, but also the businesses which do the right thing. It has potential to undermine our national reputation as a place for international students to undertake their studies and may discourage working holiday makers from filling essential gaps in the agricultural workforce.

"This problem has persisted for too long and it needs concerted action to overcome it.”

He said the Fair Work Ombudsman was not well known or understood and was confusingly styled as an ombudsman when it needed to be an enforcement agency.

“We are of the view, given the scale and entrenched nature of the problem, that there needs to be a much stronger enforcement response than has been evident to date,” the report says.

Professor Fels had been appointed to oversee the independent wage panel set up to investigate underpayment at 7-Eleven,  but had been sacked by the convenience store chain.

His taskforce noted it had issues examining 7-Eleven's underpayment problems due to a lack of resources and an inability to assess the methodology for wage repayment adopted by 7-Eleven after it dismissed Professor Fels.

The report said 7-Eleven has paid workers $160 million in backpay but "the taskforce does not have sufficient information to determine how close it comes to fully remediating all affected employees for their underpayments".

Professor Fels recommended a review of the ombudsman to ensure it had the resources, tools and culture to combat the wage underpayment problem.

His report also recommended the federal government commission a review of the small claims process in the Fair Work Act to make it easier for migrant workers to get wage redress.

“The experience of the 7-Eleven wage remediation program provides numerous lessons for businesses and governments in what can and should be done in this area. We consider the regulator could make greater use of compliance notices in seeking to obtain redress for underpayments,” he said.