By Kelly Godfrey

The Victorian and Queensland governments have criminalised wage theft. Now the Federal Government has proposed to do the same. Under the draft legislation, employers found guilty of wage theft would face gaol terms of up to 4 years, $1.1 million in fines and disqualification from being a director for up to 5 years. Given both employers and unions do not support the legislation, it may not pass Parliament. However, there are nevertheless strong incentives (legal, financial, time and reputational) to avoid underpaying employees.

In 2018, Lush disclosed to the Fair Work Ombudsman (FWO) that it had underpaid approximately 3,130 employees between 2010 and 2018.

Lush provided an undertaking to the FWO that it would:

• rectify the underpayments, initially estimated at $2 million but ended up being $4.5 million after payroll experts engaged by Lush investigated the matter at a cost of $1.5 million;
• pay $60,000 into the Commonwealth’s Consolidated Revenue Fund;
• provide training to staff about wage and entitlement payments;
• advise staff of its breaches;
• review all its employment contracts;
• operate an employee hotline for enquiries about pay and entitlements; and
• engage an auditing firm to ensure future compliance.

The FWO publicised the breach, further damaging the reputation of Lush and its brand.

Lush avoided a prosecution by self-disclosing and providing the undertaking, but it was still a costly error. Queensland and Victorian employers now have state wage theft legislation to abide by. In addition, if the federal wage theft legislation is passed, there could be more significant implications for employers like Lush. It is important that employers ensure its businesses meet wage and entitlements obligations to all employees.