“The system is broken”: Migrant workers owed over $1 billion in unpaid wages

The author of a new landmark study into underpayment among migrant workers has called on the Fair Work Ombudsman (FWO) to make it easier to report wage theft.

There is likely more than $1 billion in unclaimed wages owed to migrant workers in Australia, according to new research undertaken by UNSW’s senior law lecturer Bassina Farbenblum, with less than 10% of workers reporting underpayment.

Released on Monday, the Wage Theft in Silence report is based on a first of its kind survey of 4,322 migrant workers across the country.

It has found that while three-quarters of migrant workers know they’re being underpaid, 42% don’t report it because they don’t know what to do, or believe it would be too much work (35%).

Almost a third of workers (30%) reported earning as little as $12 an hour or less in their lowest-paid job, about half the minimum wage for casual employees in those jobs.

“The overwhelming majority do nothing about it and stay silent because the barriers are just too great,” Farbenblum tells SmartCompany.

The FWO has been cracking down on wage underpayment, particularly of vulnerable migrant workers, in recent months with a string of undertakings.

Annual report figures released earlier this month revealed a record $7.2 million in penalties were handed down in 2017-18 following FWO action amid the crackdown.

But Farbenblum says her research shows there’s still a massive wage theft problem in Australia.

“People often assume the reason migrant workers don’t want to report underpayment is because they come from a different legal culture,” she says.

“That wasn’t the case at all … the reasons are more complex.”

The reporting of underpayment is important, Farbenblum says, because it is the primary mechanism that brings wage theft to the attention of the FWO.

Almost half (46%) of survey respondents said they would not try to recover wages, despite believing they’d been underpaid, while 43% said they might try in the future.

FWO reforms needed

A quarter of migrant workers said they were worried about the immigration consequences of reporting underpayment, prompting Farbenblum to advocate for the creation of a “firewall” between the FWO and Department of Home Affairs.

“We suggest that either we need new processes or we need to substantially reform the processes within the FWO,” she says.

In most cases (53%) migrant workers that contacted the FWO said they did not successfully recover their wages, while the remaining 47% said they were successful.

An FWO spokesperson said the office was considering the report.

“It is a priority for the Fair Work Ombudsman to assist any migrant workers with concerns about their wages or entitlements,” the spokesperson said.

Farbenblum says a culture has developed among small business owners that migrant workers can be underpaid because there’s an assumption they won’t complain.

“Employers know migrant workers won’t report it,” she says.

Recent FWO cases indicate that underpayment is occurring in multiple industries.

In September a cleaning services business was penalised $144,000 for allegedly not just underpaid migrant workers, but also failing to keep employee records.

An FWO audit of 45 sushi businesses in September also found widespread underpayment of migrant workers, with 29 breaches of record keeping and payslip laws.

Study co-author Laurie Berg said the system incentivised migrant workers to stay silent.

“The system is broken,” Berg said in a statement.

“It is rational for most migrant workers to stay silent. The effort and risks of taking  action aren’t worth it, given the slim chance they’ll get their wages back.”

Businesses struggle to understand the system

Concerns about wage compliance aren’t limited to workers. Business owners have also complained the system is too complex, leading to instances of unintentional underpayment.

Australian small business and family enterprise ombudsman Kate Carnell told senators at estimates last week the complexity of the modern award system was a recurring complaint.

“Our challenge is to make [compliance] simple so that there are no excuses for not doing the right thing,” she said.

Carnell said her office is working with the FWO to create a mechanism whereby those who use FWO tools to ensure compliance wouldn’t be prosecuted for mistakes arising from that process.

“For small businesses who try to do the right thing, using tools and information appropriately, they should be able to be confident they can run with that,” she said.

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