Commonwealth Bank Fined $36k for Failing to Pay Long Service Entitlements

Australia’s wealthiest company has been fined $36,000 after admitting to not paying long service entitlements to its employees.

The Commonwealth Bank, a major private employer with a $9.5 billion profit last year, appeared in the Melbourne Magistrates’ Court after a successful case by Victoria’s wage inspectorate.

The mitigation pleas echoed themes of remorse, contrition, and no prior offences.

Magistrate finds no acceptable excuse

Wage Inspectorate Victoria accused BankWest and CommSec in 2022 of not paying over $69,000 in long service leave to 23 former employees, which was reduced to 17 individuals by the court. The amounts owed ranged from $500 to over $10,000, with most above $1,000.

The bank’s lawyers pleaded guilty to the charges before Magistrate Kathryn Fawcett. The bank has spent over $1 million rectifying the issue and agreed to cover $12,000 in legal costs for the wage agency.

“Inadvertence or system failures are not acceptable excuses for failing to pay employee entitlements,” stated Magistrate Fawcett. “While long service leave laws are complex across state and federal jurisdictions, this complexity is no excuse.”

No conviction was recorded due to the bank’s clean record, but fines of $18,000 were imposed on each entity. This is significantly lower than the $1.2 million fine imposed on Woolworths for similar offences.

The magistrate acknowledged the bank’s early guilty plea, which mitigated a potential larger aggregate fine of $40,000 for each entity.

Investigation reveals widespread underpayment

The investigation uncovered that Commonwealth Bank companies underpaid 529 current and former staff $1.673 million in long service leave entitlements. Under the law, it is an offence only if these entitlements are not paid upon the termination of employment.

A CBA spokesperson stated the bank has “cooperated with the investigation” and apologised for the errors, having remedied approximately $60,000 in underpayments plus interest to the 17 former employees involved in the proceedings. The bank has invested in improving its systems to prevent future underpayments.

The underpayments to current employees have been rectified but are not considered an offence under the act. The relevant legislation is section 9(2) of Victoria’s Long Service Leave Act 2018, with a maximum penalty of 60 penalty units ($10,904) for each day the offence continues.

Wage Inspectorate Victoria has also successfully prosecuted Woolworths, Coles, and Optus for similar offences.

Complex issue

Stephen Clibborn from the University of Sydney’s Business School, who has been researching wage theft for a decade, said, “Organisations often do not allocate enough resources to ensure compliance. Complexity in employment laws is not an excuse for non-compliance.”

Clibborn emphasised that while complying with complex tax laws is accepted and managed by organisations, similar efforts are not always made for employment laws.

Impact of the fines

The fines are unlikely to deter businesses with billion-dollar profits. Coles was fined $50,000 in 2021 for systemic failures, Spotless was fined $12,000, and Optus $13,000 plus $15,000 in costs.

A significant judgement in April saw Woolworths fined $1.3 million for underpaying over $1 million in long service leave to more than 1,000 employees. Magistrate Nahrain Warda described the situation as a “systematic and widespread failure.”

“It is a gross failure on their part for not ensuring that such errors don’t exist and any irregularities are stamped out early,” said Warda. “A large corporation like this should have thorough payroll systems in place.”