With new wage theft laws and higher penalties kicking in from January 1, 2025, businesses need to adopt a proactive approach to wage compliance.
Understanding Due Diligence
Business leaders are familiar with due diligence under safety laws, which involves understanding legal obligations, assessing compliance, ensuring resources are available, and routinely auditing for compliance. This same level of diligence is now critical for wage compliance.
A recent decision by the Federal Circuit and Family Court of Australia highlighted the significant penalties for underpayment in the absence of a proper system.
Key Steps for Wage Compliance
Assess Existing Compliance
Evaluate your current wage compliance record and identify gaps. Assess your capabilities and resources for maintaining compliance.
Ensure Adequate Systems
Develop robust systems to support compliance. This includes having qualified payroll staff, proper checks and balances, and mechanisms for reporting and rectifying errors.
Ongoing Audits
Implement a targeted audit program to ensure continuous compliance. Conduct routine audits every six months and a comprehensive audit every 3-5 years.
The Cost of Non-Compliance
In Kiernan v Naismith Truck Movers Pty Ltd [2024] FedCFamC2G 618, Naismith Truck Movers, now Global Trucking, was ordered to pay $153,090 in penalties for underpaying a casual driver by about $50,000 over three years. The company had a flawed system of paying flat trip rates, resulting in underpayments.
This wasn’t Naismith’s first offense. In Cooper v Naismith Truck Movers Pty Ltd [2021] FedCFamC2G 221, the company was fined $20,000 for similar issues.
The court emphasized the need for corrective action and warned that failure to rectify issues would result in severe penalties.
Rectify, Don’t Aggravate
Naismith’s case had aggravating factors, including a lack of contrition and no steps to ensure future compliance. Before mediation, Mr. Naismith attempted to intimidate the claimant, which further demonstrated a lack of remorse and disregard for legal obligations.
Lessons for Employers
Wage compliance should be a top priority for all employers. Deliberate non-compliance is unacceptable, and courts and Parliament are sending strong messages to that effect.
Steps to Take:
1. Assess Existing Compliance: Establish a baseline and identify any gaps in your wage compliance practices.
2. Ensure Adequate Systems: Assess and enhance your capabilities and resources to maintain ongoing compliance.
3. Ongoing Audits: Develop and implement an audit program with routine and comprehensive audits to ensure continuous compliance.
We regularly assist clients in establishing baselines and conducting targeted reviews. Reach out for assistance in ensuring your business meets all wage compliance obligations.
