There’s no easy fix for wage theft, but award review could help

Retail, fast food, hospitality and disability workers are among those that will have their entitlements reviewed.

Retail, fast food, hospitality and disability workers are among those that will have their entitlements reviewed. Photo: Getty

Retail, fast food, hospitality and disability workers are among those who will have their entitlements reviewed by the Fair Work Commission (FWC) it was announced earlier this month.

The review will focus on outcomes that are “easy to understand, stable and sustainable”.

After receiving a request from Workplace Relations Minister Tony Burke, FWC president Adam Hatcher issued a statement announcing that the FWC would be conducting a review of the seven most used awards.

This includes the awards that set the minimum conditions for workers in the retail, fast food, hospitality and disability industries.

Burke, in his letter to the FWC, expressed the “government’s interest in the Fair Work Commission initiating a targeted review of modern awards” and encouraged “the review to identify what parties believe could be done to make awards easier to use”.

Australia’s award system is ­– as a matter of plain fact – both unique and complex by world standards. Of course, that doesn’t mean it’s a bad thing, but the impact of that complexity on rates of non-compliance can’t be ignored.

Award complexity and wage theft

With wage theft scandals in some of these industries now at epidemic levels, and large, very well resourced businesses often in the firing line, the answer to the problem won’t just lie in tougher penalties and criminalisation.

Business groups like the Business Council of Australia (BCA) regularly cite award complexity as the reason for the high rate of breaches. The BCA argues in their recent Seize the moment report that the system is “virtually impossible for a business or worker to understand”.

“Virtually impossible” is hyperbolic, but they’re not entirely wrong.

There’s no doubt that there are some employers that consider ‘sailing close to the wind’ with employment laws an effective business strategy, ever searching for slick new ways to scratch out minimums and gain some kind of competitive advantage.

And others who deliberately avoid, perhaps even resent, the obligation to pay entitlements at all.

They are generally in the minority.

Most businesses do their best to meet their obligations simply as a matter of good compliance practice, and to manage the risk of costly claims which can hurt both reputation and the bottom line.

Workers pay the price

Last month the McKell Institute issued a report which estimated that wage theft costs Australian workers about $850 million each year.

Previous estimates by other firms have put that figure at over $1 billion annually.

The BCA may be right to cite concerns about difficulty understanding the award system, but it is most often the workers that will pay the piper without getting to call the tune.

And when it comes to workers pursuing underpayments or claims for award breaches, increased complexity means more legal work.

wage theft

A system of industry-wide minimum wage setting has existed in Australia for more than 100 years. Photo: Getty

More legal work means more cost. This creates a situation where the value of an individual claim may be eaten up entirely by the legal fees the worker would have to pay to make it.

The result? Many good claims go without recourse because complexity means justice can be too hard, too slow and too costly to access.

Benefits of simpler rules 

The modern award system is made of 122 different awards which set out the minimum conditions payable to a worker in the industry or job that they each apply to.

Awards are like collective agreements that are set by the FWC as the bare minimum that can apply to the workers covered by them.

It’s a system of industry-wide minimum wage setting that has existed in Australia for over 100 years and like collective enterprise agreements, they are enforced by law under the Fair Work Act.

But due to that century-long history and the broad range of issues that awards attempt to regulate, they retain terms that can be difficult to understand for both workers and employers.

And as awards set the minimum standards, unions are typically very resistant to changes to simplify them because of concerns about workers losing entitlements.

Those concerns have good foundations, too. Because just like the road to hell is paved with good intentions, even small and well-intended changes to an award can have unforeseen negative impacts on thousands of workers.

The other side of that coin?

Changes that make them harder to understand can and do expose employers to rule breaking which, when multiplied many times by the number of employees affected, can result in eye-watering and headline-grabbing breaches of the law.

The lucky number seven

Although the FWC review will only focus on seven of the 122 awards that currently apply in Australia, these seven awards apply to more than half of all award reliant workers.

Most of them are women – more than 60 per cent – and most of the jobs are low paid.

If the BCA mean what they say, and really want to fix “complex rules that suffocate innovation”, now is the time to engage constructively with unions and other stakeholders in these industries to resolve systemic complexity that continues to produce bad outcomes for many players.

We shall see.

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