The Fair Work Ombudsman has successfully obtained a historic $10.34 million in fines against the Commonwealth Bank of Australia (CBA) and its subsidiary CommSec for failing to pay their employees more than $16 million.
CBA Fined $700 Million for Wage Theft
The Federal Court has fined CBA $7.31 million and imposed an additional penalty of $3.03 million against CommSec, formerly known as Commonwealth Securities Limited.
The fines were issued following CBA and CommSec’s acknowledgment of numerous violations of the Fair Work Act, including some that were done deliberately and as part of a repeated pattern. These kinds of offenses carry a significantly higher maximum penalty.
What is Wage Theft?
These are the most severe penalties ever obtained in a legal action by the Fair Work Ombudsman.
CBA and CommSec did not have enough measures in place to ensure that the Enterprise Agreements and Individual Flexibility Arrangements (IFAs) used for their employees were carried out in a legal way.
This involved companies not following through with the necessary process of regular reconciliations and additional payments to ensure that their employees were getting the legal minimum benefits they were entitled to.
The Impact of Wage Theft on Workers
Justice Robert Bromwich discovered that the senior staff at CBA and CommSec were aware of possible compliance issues and had information that should have alerted them, but they took a long time to address these issues. Additionally, he found that HR managers failed to consider the risk that Independent Financial Advisors were not fulfilling their employees’ entitlements.
As a result, employees’ rights to the minimum legal entitlements were breached, causing them to be in a worse position for many years.
CBA violated labor regulations by falsely claiming to certain employees that they would benefit more from the IFAs.
Between 2015 and 2021, a combined total of $16.07 million was underpaid to 7,402 employees of CBA and CommSec.
The impacted employees were situated in urban and rural areas across all states and territories in Australia. The majority were employed in customer service positions.
The CBA’s Response to the Fine
Anna Booth, Fair Work Ombudsman, expressed strong disapproval at the lack of responsibility shown by a big corporate employer in ensuring that their employees were paid fairly for the work they did, despite having ample resources.
Ms. Booth stated that the senior managers at CBA and CommSec did not implement necessary measures to prevent underpayments caused by their staff remuneration system, and they were slow to address the issue even when warned about the risks of non-compliance.
Ms Booth stated that CBA made the correct decision in reporting its non-compliance to the Fair Work Ombudsman, cooperating with the investigation, admitting to the violations, and implementing a comprehensive remediation program that included rectifying underpayments dating back to 2010 for employees across multiple companies within the CBA Group. These underpayments were beyond the time limit for legal action by the FWO. As a result of CBA’s cooperation, the penalties were decreased.
Nevertheless, Ms. Booth stated that the employees should have been paid accurately from the beginning.
Ms. Booth expressed disappointment in companies with large human resources and legal teams who fail to ensure their staff are paid their rightful wages.
Ms Booth pointed out that there are still many major corporations in Australia that need to make significant improvements in their cultural approach to compliance.
Ms. Booth emphasized that the Fair Work Ombudsman has been urging big companies to prioritize implementing systems to guarantee that they are paying their employees their full legal entitlements. She stated that companies cannot prioritize their financial interests without also ensuring that their systems comply with minimum entitlement standards through effective governance.
The situation underscores the fact that a negative corporate culture in terms of following regulations can lead to significant repercussions, such as being subjected to legal penalties and experiencing harm to one’s reputation.
Justice Bromwich determined that CBA and CommSec had more than enough capability to prevent such incidents from happening, especially for such a long period of time.
Also Read: Young Australians Staying Home: A Growing Trend
What Can Be Done to Prevent Wage Theft?
Justice Bromwich stated that the obligations could have been easily met and checks to ensure compliance were not difficult to establish. However, this did not occur, and it is important to send a strong message that such behavior will not be accepted, particularly for potential violators, but also as a reminder for CBA and the entire CBA Group.
Justice Bromwich concluded that the fines should serve as a warning to other companies to not engage in the same behavior, such as not following workplace regulations and lacking sufficient systems to ensure compliance.
Justice Bromwich expressed the importance of preventing a system from continuing where fundamental mistakes can be made without proper checks or detection, leading to necessary corrections.
Employers, particularly those in the financial services industry, need to understand that it is not worth the effort to have insufficient compliance systems in place.
Michele O’Neil, the President of the Australian Council of Trade Unions, stated that wage theft deprives workers of their rightful earnings, preventing them from purchasing essential items for their livelihood.
She stated that the money owed to workers is genuine and adding to the challenges of rising living expenses. A minor instance of wage theft could have a significant impact on a worker’s ability to cover basic expenses such as rent, groceries, or transportation to work.
A fine of 7 million dollars may seem substantial to many, but for a company making profits of almost $5 billion dollars every six months, it is insignificant. This is why civil penalties play a crucial role in discouraging companies from simply budgeting for fines as a regular business expense.
