Commercial Litigation, Debt Recovery & Insolvency

Employment Law

Wage Theft – Underpayment of Wages

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Wage Theft and the Underpayment of Wages in Queensland lawyerWage theft is the non-payment of your legal entitlements by your employer, including award rates, penalty rates, wages, and overtime.

If your employer has stolen your wages then you may have a claim in the Federal Court, Federal Circuit Court, the District Court, or the Magistrates Court.

You can seek an order from your employer and also any person involved in the contravention.

There are processes that should be followed in different situations, and include negotiation, reporting to the Fair Work Ombudsman, mediation, conciliation, and filing a claim in Court.

This article will explain the requirements and the process of making a claim for wage theft below.

If you have not been paid your legal entitlements by your employer, including award rates, penalty rates, wages, and overtime – then you might have a wage theft claim against the employer

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What is Wage Theft?

The term wage theft can take a number of different forms, including:

  1. Not being paid the correct hourly rates;
  2. Illegal cash-back contracts;
  3. Being paid cash-in-hand or off-the-books;
  4. Non-agreed deductions from wages;
  5. Unpaid overtime and penalty rates;
  6. Illegal phoenixing;
  7. Sham contracting arrangements; and
  8. Non-payment superannuation.

We will detail these in more detail below.

Not Being Paid the Correct Hourly Rates

Probably the most common form of wage theft is not being paid the correct hourly rates.

For the most part, minimum hourly rates are prescribed by the relevant modern award.  If you are not being paid the correct amount, then your employer is stealing your wages and you will have a claim.

Modern awards include all the information you need to understand your entitlements including information in relation to:

  • Types of employment and termination of employment;
  • Classifications and minimum wage rates;
  • Hours of work and related matters;
  • Leave and public holidays; and
  • Industry specific provisions.

The modern award defines the type of work classification and the minimum pay amount in relation to that classification.

Another common form of wage theft is an employer paying an employee at a level 2 rate, when the employee is doing level 4 work.  If your employer is doing this then they are stealing your wages and you may have a claim.

Click to go to the list of Modern Awards here

Another way that an employer can steal an employee’s wages is by paying cash-in-hand.

Being Paid Cash-in-hand or Off-the-books

Although a seemingly good prospect, getting paid cash-in-hand or off-the-books can also result in wage theft.

Being paid cash-in-hand or off-the-books may mean that your employer is not paying superannuation, leave entitlements, and other entitlements, etc.

Also, because the non-payment of tax seems enticing, the employer may also pay you less than the minimum wage.

It is possible to be paid in cash, that’s not the problem, but the employer must still pay all of your entitlements and provide you with a payslip.

Being paid cash-in-hand or off-the-books can result in wage theft and you may have a claim.

Unpaid Overtime

Your Modern Award will provide for the amount of hours a full-time employee has to work per week and overtime rate of pay for hours worked outside of ordinary time.

These rates of pay are usually around 150% to 200% – aka time-and-a-half to double-time.

If your employer has not paid any overtime rates, then this is wage theft and you may have a claim.

Unpaid Penalty Rates

Also, your Modern Award will provide for the penalty rate that the employee is entitled for working on the weekend or on a public holiday.

These rates are usually between 125% to 250% – aka time-and-a-quarter to double-time-and-a-half.

If your employer has not paid any penalty rates, then this is wage theft and you may have a claim.

Find your penalty rate amount in your Modern Award here.

Illegal Cash-Back Schemes

In some instances, an employer may make an employee give back a percentage of their wages.  This is sometimes known as a “Cash-back scheme”.

If this happens, then that money is treated like back-pay and can be claimed from the employer.

If your employer is making an employee pay “cash-back” then this is wage theft and the employee may have a claim.

Non-Agreed Deductions from Wages

An employer and an employee can agree that certain deductions can be made from the employee’s wages.  An employer can only deduct money if:

  1. The employee agrees in writing; and
  2. It’s principally for the benefit of the employee; and
  3. It’s allowed by a law, a court order, the Fair Work Commission, a modern award, or registered agreement.

Any deductions that are not agreed or are not for the benefit of the employee are wage theft and the employee may have a claim.

Illegal Phoenixing

Phoenixing is a term used to describe the act of transferring business assets to another company, continuing to trade in the new company, and leaving debts and liabilities in the old company – including employee wages and entitlements.

Usually, the old company will go into liquidation with a very slim chance of getting any money.

If your employer does this then this is wage theft and the employee may have a claim.

An employee may be entitled to the Governments Fair Entitlements Guarantee (“FEG”).

Click to learn more about the FEG here.

Sham Contracting Arrangements

A sham contract is when an employer tries to disguise an employment relationship with a contractor relationship, and incorrectly classifies an employee as an independent contractor.

An employer may try to pay an employee as a contractor so that the employee will lose their entitlements, including superannuation and leave entitlements.

Whether someone is an employee, or a contractor depends on a number of different complex factors and is usually determined by the Court.

However, if an employee is a party to a sham contract then this may be wage theft and the employee may have a claim.

Non-payment of Superannuation

Unfortunately, another common form of theft (albeit, not wages per se) is the non-payment of superannuation.

Most employment relationships require the employer to contribute a minimum of 9.5% of your wages into a superannuation account.

Every dollar that goes into superannuation now will be worth a lot more by retirement age, so it is very important that an employer pays this entitlement.

If your employer has not paid, or underpaid, your superannuation then the employee may have a claim.

Can I Make a Claim for Wage Theft?

If you fit into any of the categories above, then it is likely that you will be able to make a claim against your employer for unpaid wages and entitlements.

Obviously, each claim is different and will depend on the particular work, the Modern Award, and the employment contract.

Making a Claim for Wage Theft

The starting point for any claim for wage theft is section 45 of the Fair Work Act 2009 (CTH) (“FWA”).

Section 45 of the FWA says:

A person must not contravene a term of a modern award

A modern award sets out the minimum employment terms and conditions.

These minimum employment terms and conditions include:

  1. Wages and pay;
  2. Employment allowances;
  3. Staff breaks – duration and time;
  4. The hours of work;
  5. Any overtime payable; and
  6. Any penalty rates payable.

Note: Section 45 of the FWA is a civil remedy provision.

Section 539 of the FWA outlines the Civil remedy provision, the person, the Courts, and the maximum penalty.

The table in subsection (2) of this section says that a breach of section 45 of the FWA applies to an employee and an employer (amongst others).

It also defines the Courts which have jurisdiction as the Federal Court; the Federal Circuit Court; and an eligible State or Territory court.

The Wage Theft Process

The process for making a wage theft claim for unpaid entitlements is:

  1. Work out exactly what the employee is owed;
  2. Try to negotiate with the employer to reach a settlement;
  3. Report the employer to the Fair Work Ombudsman (“FWO”);
  4. Commence legal action in the Court with jurisdiction;
  5. Sometimes the Court will order mediation or conciliation;
  6. Obtain a judgment against the employer;
  7. Enforce the judgment.

This is an over-simplification of the process, but this is essentially what an employee will need to do.

We will explain the process in more detail below.

Work out Exactly what the Employee is Owed

It is important to work out exactly how much money the employee is owed.

Correctly calculate the exact amount (or as reasonably close as possible).  This will include:

  1. The minimum rate of pay calculated at the correct level;
  2. Any allowances allowable;
  3. Any leave loading that has accrued;
  4. Any leave payments that have not been paid;
  5. Any overtime that has not been paid;
  6. Payment of the correct penalty rates;
  7. Any additional tax and superannuation; and
  8. Any entitlements in the award, employment contract or other agreement.

Once the employee has a figure calculated, it is best practice to approach the employer, or engage a solicitor to approach the employer, to attempt to reach a settlement.

Negotiate with the Employer to Reach a Settlement

Most good lawyers will attempt to resolve wage theft claims without going to Court.  Going to Court can be stressful and costly for both parties, so there is a real incentive to try to reach an agreement by negotiation.

Litigation lawyers are skilful negotiators, and it is well worth engaging a litigation lawyer to negotiate on your behalf.  Reaching a settlement will involve a compromise by both parties.

Read our article here about Settling Litigation Early.

If the employer is being unreasonable and refusing to settle, then the employee can refer the matter to the Fair Work Ombudsman (“FWO”).

Report this Employer to the Fair Work Ombudsman

The Fair Work Ombudsman is there to provide help and assistance in relation to:

  1. Wage theft – disputes relating to pay, penalty rates, any loadings and allowances;
  2. Ending employment – giving notice, employees final pay and redundancy packages;
  3. Leave entitlements including annual leave, sick leave, maternity leave and parental leave;
  4. Any sham contracting arrangements; and
  5. Anything covered by an award, enterprise agreement or other registered agreement.

The FWO will then attempt to resolve the dispute with the employer by negotiation in an attempt to reach a settlement.

If no settlement can be reached informally, then the FWO can refer the matter to a mediation.

A mediation is usually a telephone conference where the employee and the employer work with a skilled mediator to help the parties in dispute to come to a reasonable agreement to resolve the wage theft dispute.

This mediation can last up to two (2) hours.

If the parties agree on a resolution, then that agreement can be documented by way of a formal agreement.

The mediator may assist by drafting a deed of settlement outlining the terms of the agreement, time for compliance, and anything else of concern.

If the matter does not settle at the mediation, then the employee must take legal action to recover the unpaid wages.

Commence Legal Action in the Court with Jurisdiction

Legal action for wage theft can be broken down into two (2) separate parts, namely:

  1. Claims under $20,000.00; and
  2. Claims over $20,000.00.

Small Claims Under $20,000.00

A claim under $20,000 is called a small claim.

Section 548 of the Fair Work Act 2009 (CTH) (“FWA”) confers jurisdiction on the Magistrates Court or the Federal Circuit Court if it relates to an amount that an employer was required to pay to, or on behalf of, an employee; and it is for an amount of $20,000 or less.

There are advantages and disadvantages in commencing action in this small claims jurisdiction.

Basically, he court is not bound by any rules of evidence and procedure and may act in an informal manner; and without regard to legal forms and technicalities.  This makes the process easier.

However, a party to small claims proceedings may be represented in the proceedings by a lawyer only with the leave of the court.  This means that if leave is not given, then the employee may have to appear on their own.

In Queensland this small claim in commenced in the Magistrates Court by way of Employment Claim. 

Queensland Industrial Relations Commission (QIRC) for a compulsory conciliation hearing in the first instance.

Once claim is filed, the Court will refer the matter to the Queensland Industrial Relations Commission (“QIRC”) for a compulsory conciliation hearing.  If the matter does not resolve by way of conciliation, then the proceeding will progress.

In the Federal Circuit Court a small claim is commenced by way of Form 5 – Small claim under the Fair Work Act 2009.

We strongly advise seeking legal advice before filing the small claim.

However, just because the amount is less than $20,000.00 that allows an employee to proceed as a small claim, but it does not compel an employee to.  An employee can commence as if it were a claim over $20,000.00.

Claims Over $20,000.00

Claims over $20,000.00 can be commenced in the Federal Court, the Federal Circuit Court, or an eligible State or Territory court.

Section 543(1) of the FWA says:

The Federal Court or the Federal Circuit Court may make any order the court considers appropriate if the court is satisfied that a person has contravened, or proposes to contravene, a civil remedy provision.

Section 543(2) of the FWA says:

Without limiting subsection (1), orders the Federal Court or Federal Circuit Court may make include the following:

(a)  an order granting an injunction, or interim injunction, to prevent, stop or remedy the effects of a contravention;

(b)  an order awarding compensation for loss that a person has suffered because of the contravention;

(c)  an order for reinstatement of a person.

Section 545(3) of the FWA says:

An eligible State or Territory court may order an employer to pay an amount to, or on behalf of, an employee of the employer if the court is satisfied that:

(a) the employer was required to pay the amount under the FWA or a fair work instrument; and

(b) the employer has contravened a civil remedy provision by failing to pay the amount.

Remember section 45 of the FWA is a civil remedy provision.

Therefore, the Federal Court, and the Federal Circuit Court have jurisdiction to make an order awarding compensation for loss that an employee has suffered because of the contravention of section 45 of the FWA, or the contravene of a term of a modern award.

Further, eligible Queensland State Courts also have jurisdiction to hear claims for wage theft and can make an order the employer to pay an amount to the employee for unpaid wages.

But what is an eligible State or Territory court?

Eligible State Courts for Wage Theft Claims

Section 12 of the FWA defines “eligible State or Territory court” to mean one of the following courts:

(a) a District, County or Local Court;

(b) a Magistrates Court;

So, for a proceeding for unpaid wages, the matter can be commenced as a general claim in the Magistrates Court and the District Court.

Jurisdiction of the State Courts

The State Courts have a monetary jurisdiction in the following amounts:

  1. The Magistrates Court – up to $150,000.00;
  2. The District Court – from $150,000.00 to $750,000.00.

It would not be usual for an employee to be owed more than $750,000.00 in stolen wages.

Is the Business Owner Liable for the Debts?

Yes.  The director of the company or the any person involved in the contravention can be personally liable for the contravention.

Section 550(1) of the FWA says:

A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.

It then goes on to define what being “involved in a contravention” means.  Section 550(2) says:

A person is involved in a contravention of a civil remedy provision if, and only if, the person:

(a)  has aided, abetted, counselled or procured the contravention; or

(b)  has induced the contravention, whether by threats or promises or otherwise; or

(c)  has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or

(d)  has conspired with others to effect the contravention.

In Fair Work Ombudsman v Quincolli Pty Ltd & Anor [2011] FMCA 139 Driver FM said:

The authorities show that in order for a person to have accessorial liability under … 550 of the Fair Work Act, he or she must be a knowing participant or in other words:

a. must have knowledge of the essential facts constituting the contravention;

b. must be knowingly concerned in the contravention;

c. must be an intentional participant in the contravention based on actual not constructive knowledge of the essential facts constituting the contravention – although constructive knowledge may be sufficient under s.728(2)(c) in cases of wilful blindness; and

d. need not know that the matters in question constituted a contravention.

So, if these things can be proven, then the employee may obtain judgment against the person (or people) involved in the contravention.

Once an employee commences legal action in the Courts against the company, the business, and against a person involved in the contravention, the objective is to obtain from the Court a judgment or enforceable money order against them.

Once you are given judgment, and the debtors still do not pay, you can enforce that order over the property of the enforcement debtors.

Enforce the Wage Theft Judgment

This website has a lot of information of enforcement.

If you have judgment on a company, then you can:

  1. Enforce with an enforcement warrant; or
  2. Serve a statutory demand.

If you have a judgment against a person, then you can:

  1. Enforce with an enforcement warrant; or
  2. Serve a bankruptcy notice.

Read the articles below in relation to enforcement of money orders.

Moving Forward – Wage Theft

Employees have a right to claim their wages for up to 6 years after the amount became due and payable.  This is the limitation period and it cannot be extended.

If you have a claim for wage theft, or unpaid entitlements then contact us today.

If you have not been paid your legal entitlements by your employer, including award rates, penalty rates, wages, and overtime – then you might have a wage theft claim against the employer

DEDICATED TEAM – COMMERCIALLY MINDED – PROVEN RESULTS

GET A FREE FEE ESTIMATE TODAY

OR CALL: 1300 545 133 FOR A PHONE CONSULTATION