Woolworths facing criminal charges over failure to pay long service leave

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Charges have been filed against supermarket giant Woolworths over allegedly failing to pay more than $1 million in long service leave to staff at its Victorian stores. 

Wage Inspectorate Victoria alleges the companies failed to pay more than $1 million in long service leave entitlements to more than 1000 employees over the three years to 2021.

Woolworths discovered the issue after engaging in an extensive end-to-end review of its payroll systems. The supermarket giant self-reported the findings to the regulator at the beginning of last year. It has since back-paid the staff, apologised, and rectified the issue.

Victoria, like many states, has legislated criminal penalties for wage theft – including long service leave. The case is now before the courts and will take some time to resolve.

Tough attitude toward wage theft

Australian Law is very tough on companies that have committed wage theft. Wage theft laws have been drafted very broadly and can be broken inadvertently.

Most Australians would traditionally think of wage theft in the sense of an employer literally stealing or forcing their employees to hand back some of their wages – which has happened in the past.

However, the laws are somewhat broader, and simply include deliberate or dishonest underpayment of employee entitlements. Woolworths will now have to prove that the underpayment wasn’t deliberate – which isn’t necessarily straightforward. 

Staying Compliant

The best way to stay out of the legal quagmire of wage theft is to have a vigorous attitude towards compliance in the first place, with systems in place to ensure that your payments are correct every time.

Tanda has compiled the “Fair Work Five”, a list of the most common mistakes businesses make when employing staff on major awards. While not exhaustive, avoiding the major issues is a good first step to staying compliant.

  1. Not applying awards to the right people

Failing to correctly classify a worker under the appropriate award or enterprise agreement can have major consequences for your Australian business. All pay rates and entitlements like annual leave are calculated based on the coverage of an award or enterprise agreement.

  1. Not properly implementing new agreement terms

Changing enterprise agreements is a difficult and time-consuming process. This naturally leans towards taking shortcuts or thinking a term may not apply or isn’t as broad as it is. It’s important to avoid this by rigorously reviewing your agreements when they change. 

  1. Paying annual salaries that aren’t enough to cover entitlements

One of the biggest mistakes Australian business owners make is to simply assume offering someone a salary means that award benefits and other entitlements no longer apply. If someone is covered by an award, they’re entitled to those benefits, except in very rare circumstances.

  1. Poor Time Recording Practices

Digital technology has revolutionised the way businesses handle their payroll in recent years. However, those who haven’t changed their systems risk being left behind. In its 2021 Annual Report, the Fair Work Ombudsman identified poor time recording practices as “ineffective and outdated manual processes for recording hours of work, or not keeping records of time worked at all for employees covered by Fair Work instruments”.

In other words, Fair Work believes having old, manual processes is high risk and likely to lead to underpayment in Australian businesses. This is reflected in Fair Work’s attitude towards compliance. The Ombudsman’s biggest targets are businesses that don’t record hours at all, or have outdated systems for doing so.

  1. Ineffective governance and systems

The reason the Fair Work Ombudsman is so interested in governance is simple – poor governance often leads to Australian employees being underpaid. Wage theft is the Ombudsman’s top concern, and through compliance action it has recovered hundreds of millions of dollars in the last financial year alone.

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