Australian industrial relations in 2019: The year wage theft went mainstream

Introduction

Last year’s Annual Review issue reflected on a year of policy stagnation in the face of a widely anticipated change of Commonwealth Government in the forthcoming general election. However, against the predictions of pre-election polls and industry expectations, the Liberal-National Coalition retained government at the May 2019 federal election.

The key open question asked in last year’s Annual Review that must now be answered is: ‘If the Liberal-National Coalition achieves a surprise election victory, will they continue a liberalisation agenda or will their moderate voices seek to address public discontent with business in relation to industrial relations?’ (Clibborn, 2019a). The answer to this question began to emerge in 2019 and it is a complex one. Rather than taking just one of these paths, the Australian Government has instead sought to triangulate its industrial relations policies, pursuing an agenda that draws on both options simultaneously. While not yet crystallised in legislation, the policy efforts of the government, particularly in addressing employer non-compliance with minimum employment standards, have followed this pattern.

Following the election, a cabinet reshuffle moved industrial relations responsibility away from the Jobs/Employment portfolio, with Attorney-General Christian Porter also taking responsibility as Minister for Industrial Relations. This significant change of home for industrial relations in the Australian Government signalled legal reforms to come and perhaps continuation of the ‘command and control’ model of workplace regulation whereby workplace rules are contained in legislation and directly enforced by the state (Cooney et al., 2006). This interpretation was confirmed by the Treasurer, Josh Frydenberg, who announced industrial relations, together with competition and deregulation, as the government’s main targets for reform (Crowe, 2019).

A number of the Annual Review articles (Birch and Preston, 2020; Bray et al., 2020; Schofield-Georgeson and Rawling, 2020; Sheldon and Thornthwaite, 2020) identify the government’s regulatory response to wage theft, in particular its proposal to create criminal sanctions, as a defining feature of Australian industrial relations in 2019. This introductory article will thus examine these developments before providing an overview of the eight articles that follow in this 2019 Annual Review of industrial relations in Australia.

Wage theft and other employer non-compliance with minimum employment standards

The issue of wage theft and other employer non-compliance with minimum employment standards has been a constant in the Australian media since the ABC/Fairfax exposé of 7-Eleven in 2015 (Australian Broadcasting Corporation (ABC), 2015). After its formation in 2016, the Australian Government’s Migrant Workers’ Taskforce published its final report in March 2019, making a range of recommendations that the Australian Government accepted in principle prior to the general election (O’Dwyer, 2019). Following the election, Minister Porter announced plans to adopt the Migrant Workers’ Taskforce recommendation to criminalise wage theft (McCauley, 2019).

To that point, the policy had been more a feature of union rhetoric and some state Labor governments than the Coalition’s policy platform. Prior to the election, federal Labor maintained the position that ‘industrial relations should be in the civil law realm’ (Patty and Towell, 2018). This view may have reflected a concern that introducing criminal sanctions to industrial relations would set a precedent, easing the way for future additional workplace crimes applying to union officials or employees. This interpretation gained some credence in light of the comments from some employer associations noted in Sheldon and Thornthwaite’s (2020) Annual Review article.

The Attorney-General issued a discussion paper in September 2019 seeking public consultation on penalties for non-compliance (Australian Government, 2019), postponing to a second discussion paper issues of enforcement. The Senate, on a motion from Labor Senator Tony Sheldon, arranged an additional inquiry into ‘Unlawful underpayment of employees’ remuneration’ to report in 2020. These initiatives add to the numerous inquiries in recent years dealing with employer non-compliance, including (to name just some) the Australian Government’s three-year Migrant Workers’ Taskforce investigation, four state Parliaments’ inquiries and the Senate’s inquiry, from which its 2016 report was titled ‘A National Disgrace: The Exploitation of Temporary Work Visa Holders’ (Senate, 2016).

In 2018, Chris F Wright and I noted (Clibborn and Wright, 2018) the dramatic rise in the reporting of employer underpayment of wages since 2015. We argued that, despite the seriousness of the problem, the Australian Government had been either unable or unwilling to do more than make minor changes to policy and law to better ensure employer compliance with minimum employment standards due to ‘conflicting imperatives of the state, business influence over the policy process and weak political incentives to address underpayment’ (Clibborn and Wright, 2018: 208). At that time, the preponderance of evidence suggested that those primarily affected were temporary migrant workers on hourly pay rates below those mandated by applicable awards. We observed that the Australian Government had implemented only minor reforms, ‘merely tinkering around the edges’ and treating the problem ‘as it might any public relations challenge: doing just enough to placate the media and the public so as to quell any outrage that might result in lost votes’ (Clibborn and Wright, 2018: 221). So, in light of this analysis, why is the Australian Government taking such a seemingly tough stance against employers by introducing criminal sanctions? Do the 2019 developments indicate a significant shift in regulatory approach?

Two key changes in 2019 media reports of employer non-compliance related to the fame of the businesses that had underpaid their workers and the type of workers affected. A number of prominent employers were found to have breached employment laws. Most notable were George Calombaris’ MAdE Establishment hospitality business and Woolworths supermarkets admitting to underpayments of $7.8 million and about $300 million, respectively (ABC News, 2019; Marin-Guzman, 2019). Both cases involved well-known brands, Mr Calombaris from the ‘Masterchef’ television show, and Woolworths, one of Australia’s largest private sector employers. In both cases, permanent, salaried employees were found to have been underpaid due to long hours of work, bringing their effective pay rates below award minimums. In a likely example of media-driven self-regulation, given the apparent risk of media exposure, at least 22 large companies have since self-reported their own non-compliance to the Fair Work Ombudsman (Hannan, 2019). In 2019, wage theft, broadly defined, effectively went mainstream and was no longer viewed as primarily affecting temporary migrant workers performing hourly labour in franchises, hospitality or horticulture (albeit that remains the likely situation), but including citizens in full-time, salaried roles. The changed public face of wage theft and other employer non-compliance, and the potential electoral consequences of inaction, or dividends of action, seem to have provided the political impetus for serious reform.

On its face, the plan to impose criminal liability for employer breaches of employment law appears to be a significant reform, particularly from a Coalition government. It certainly sends this signal to the electorate, but the question remains as to how effective the measure will be at promoting employment law compliance. The criminal policy measures, such as together with the 2017 tenfold increases in maximum fines (Fair Work Amendment (Protecting Vulnerable Workers) Act), appear to be based on traditional, discredited theories of law enforcement focused on deterrence. They implicitly assume that increasing penalties will increase compliance because employers respond in a calculated way (Winter and May, 2001), measuring the size of the penalty against the financial benefit of non-compliance. However, this policy approach risks embracing the ‘fairy tale that higher sanctions lead to greater compliance’ (Parker and Nielsen, 2011: 415) and ignores other factors more likely to encourage compliance such as the likelihood of inspections by a state agency (Braithwaite and Makkai, 1991; Hardy and Howe, 2017).

This is additionally problematic given the chronic under-resourcing of the Fair Work Ombudsman, meaning there is little certainty of enforcement of any sanctions or of employer perceptions of likely enforcement. The Attorney-General stated in 2019 that ‘the Government has invested over $60 million in additional funding for the FWO in recent years’ (Australian Government, 2019: 3). Yet the Fair Work Ombudsman’s annual revenue from government remains lower now than in 2009, it now shares that revenue with the Registered Organisations Commission, and its annual reports and the government’s budget papers do not yet disclose the $60 million additional investment (Clibborn, 2019b). A number of related concerns have been raised about the effectiveness of any criminal sanctions introduced to target wage theft (Hardy, 2019; Kennedy, 2019).

Regardless of the potential ineffectiveness of criminal sanctions as a means to increase employer compliance with minimum pay laws, the government has nonetheless taken a strong public stance against wage theft. These plans, together with firm statements directed at prominent employers like Calombaris and Woolworths (McCauley, 2019; Patty, 2019), send a clear public signal. They present a challenge to the Australian Labor Party’s and unions’ traditional representation of workers, in an apparent attempt by the government to triangulate its policy offerings. As former United States President Bill Clinton’s advisor Dick Morris (1997) advocated to the President, coining the term,

Triangulate, create a third position, not just in between the old positions of the two parties but above them as well. Identify a new course that accommodates the needs the Republicans address but does it in a way that is uniquely yours. (p. 80)

Articles in the Annual Review

Each of the six articles in this Annual Review considers a distinct aspect of Australian industrial relations in 2019. Elisa Birch and Alison Preston present their analysis of both conventional and non-conventional labour market indicators, offering a robust and nuanced examination of the Australian labour market. They note continued sluggish growth in wages, below the level required to stimulate employment growth, and a steady unemployment rate. However, they raise concerns about continued reliance on aggregate measures such as these to underpin policy development. The authors observe high growth in underemployment and part-time, casual and insecure work, identifying problems with continued reliance on full-time employment data. They note continued feminisation of the workforce, particularly in already feminised sectors such as healthcare and social assistance, suggesting the need to change the way we measure and monitor the labour market. Overall, they assess the labour market to be weak, and note in particular the growing significance of part-time, casual and insecure work with relatively little information about its determinants.

Meraiah Foley, Sue Williamson and Sarah Mosseri’s (2020) review of women, work and industrial relations also examines the recent increase in female labour force participation in Australia and the persistent gender pay gap, 50 years after Australia’s principle of ‘equal pay for work of equal value’ was established. They examine outcomes from the Royal Commission into Aged Care from the perspective of that sector’s particularly high female workforce participation. Overall, the authors view 2019 as one of unfulfilled promise of change for working women in Australia after the Australian Labor Party had offered much in its unsuccessful election campaign. Despite little present progress in gender equality measures and policy, the review also looks to the future and the impact of increased job automation and the expanding digital platform economy. In relation to the ‘future of work’ debate, they argue for more attention to the ways these trends interrelate with existing workplace and labour market gender inequities.

Johanna Macneil, Mark Bray and Leslee Speiss’s article on unions and collective bargaining finds unions’ early hopes of change to a more supportive Australian Government, helping to revitalise unions and collective bargaining, quashed at the general election. Instead, unions faced continued partisan policies, most notably in the form of the Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill. Union strategy thus pivoted from its pre-election focus on ‘changing the rules’ to retaining power in the face of a hostile government. This included amalgamation with the formation of the United Workers Union, now Australia’s largest blue-collar union. The authors note a recent reversal of the overall trend of decline in number of new collective agreements. However, they point to the Fair Work Commission clearing a backlog as a possible explanation rather than any change in overall fortunes of collective bargaining. With that qualification, they do provide insight into recent cases of cooperative collective bargaining under the Fair Work Commission’s ‘New Approaches’ programme that illustrate mutual benefits of the approach. The authors conclude with an open question over whether the positive signs in collective bargaining in 2019 represent a temporary revival or the green shoots of ongoing growth.

Peter Sheldon and Louise Thornthwaite build on their previous annual review of employers and employer association matters by noting the continuing escalation of public discontent with business regarding industrial relations. This challenge to businesses’ social license has not prevented employer associations from continuing their push, particularly after the election result, for less employee protection, less support for employee collective action and less third party involvement in the employment relationship. Sheldon and Thornthwaite argue that a predictable consequence is employers abusing their increased market power, as evidenced in wage theft and related non-compliance. The developing employer response to public outcry at wage theft has been to argue that simplification of a complex industrial relations system will aid compliance. Employers also maintained their criticism of the Fair Work Commission’s application of the better off overall test (BOOT), blaming it for making collective bargaining effectively unworkable for them and contributing to its overall decline.

Eugene Schofield-Georgeson and Michael Rawling’s review of industrial legislation notes another year of minimal legislative reform at the federal level with the exception of some specific endeavours. However, the authors analyse a number of potentially significant developments at various stages in the Commonwealth Parliament as well as continued return of the states to regulation of private sector employment. Of particular note is the progress towards criminalising wage theft, more advanced in the case of Victoria’s Andrews Labor Government than the Australian Government.

Dominique Allen and Ingrid Landau’s (2020) review of major court and tribunal decisions tracks the progress of employers’ push to expand control over employees’ actions, highlighting this as an area to watch in future. Several cases demonstrated and tested employer efforts to restrain their employees’ actions outside of the workplace through codes of conduct. While subject to a number of decisions, including by the High Court in the case of Comcare v Banerji, and prominent public analysis in the case of Israel Folau and Rugby Australia, questions remain regarding the extent to which employers may control this aspect of employee behaviour. Another decision, Lee v Superior Wood, provided insight into employers’ ability to demand employee biometric data. The full bench of the Fair Work Commission in this case decided in favour of an employee who was dismissed after refusing his employer’s command to provide fingerprints. The authors also examine the rise in class action litigation and of consumer and intellectual property law in employment matters.

Jonathan Hamberger (2020) presents his practitioner review of Australia’s collective bargaining system. This is a timely analysis in light of its decline (Bray et al., 2020; Sheldon and Thornthwaite, 2020) and serious questions raised by both employer and employee representatives about its viability. He revisits the original vision for enterprise bargaining of the system’s patron, then Prime Minister Paul Keating, and considers whether the system is meeting its original aims. Hamberger argues, through case analysis and illustrative examples of the operation of the BOOT, that employers can do little more than ‘add on’ to the award safety net rather than explore outcomes suitable to particular pairings of employer and employees at given times. He concludes by offering a way forward aimed at bringing enterprise bargaining back in line with Keating’s original vision.

Finally, Damian Grimshaw’s (2020) international review article examines the responses of international organisations to ‘future of work’ challenges presented by new technologies and inequality. He compares and contrasts seven flagship reports from five international organisations: the International Labor Organization, Organisation for Economic Co-operation and Development, the United Nations Industrial Development Organization, the United Nations Development Programme and the World Bank. Through examining similarities and differences between the reports, concerns are highlighted regarding growing inequalities, including between capital and labour and based on geography and gender, and the impacts of technological change, market power, global value chains and labour institutions. The article makes a valuable contribution to the future of work debate and highlights a number of knowledge gaps and areas for future research.

Conclusion

The incumbent Coalition government’s federal election victory in May marked a turning point in expectations of industrial relations actors. Unions returned to fighting for survival against continued hostile government policies, employer associations continued to push for increased employer prerogative and some employers continued to breach employment laws. Those employers with prominent brands faced public shaming in the media, bringing into question their social license.

In the face of near constant media attention on employer non-compliance with minimum wage standards, the Australian Government made a strategic decision to act in 2019. However, that action has so far been to make bold public statements denouncing wage theft and promising criminal sanctions for the most egregious cases while continuing consultation. It has simultaneously pressed ahead with its anti-union ‘Ensuring Integrity’ legislation. Meanwhile, states have continued to lead with substantive responses to wage theft, most notably in Victoria.

After five years of media attention, the Migrant Workers’ Taskforce and numerous state and federal inquiries and consultations, the question for 2020 is: Will the Australian Government implement a research-based, well-resourced policy to substantively address employer non-compliance with minimum wage laws, or will criminalising wage theft merely provide distraction from a continued liberalisation agenda?