Criminal charges for Victorian long service leave underpayments

This month, the Wage Inspectorate Victoria (WIV) has flexed its muscle by commencing criminal proceedings against subsidiaries of one of Australia’s largest financial institutions. This follows the successful investigation of Coles by the WIV in 2020, which revealed long service leave underpayments. In this article, we elaborate on these two actions.

Background

The main functions of the WIV include:

• informing, educating and assisting people in relation to their rights and obligations under the Wage Theft Act 2020 (Vic) (Wage Theft Act);
• promoting, monitoring and enforcing compliance with the Wage Theft Act;
• investigating the commission or possible commission of offences under the Wage Theft Act; and
• bringing criminal proceedings in relation to alleged employee entitlement offences.

A key employee entitlement recognised under the Wage Theft Act is the right to accrue and be paid of long service leave in accordance with the Long Service Leave Act 2018 (Vic) (LSL Act). The LSL Act covers most Victorian employees, including casual and seasonal workers, with the exception of those whose long service leave entitlements are derived from a registered agreement, pre-modern award or other legislation (such as portable long service leave schemes).

Under section 9(2) of the LSL Act, if an employee’s employment is terminated before they have taken all their accrued long service leave, the full amount of the accrued entitlement is payable. The maximum penalty for each offence is 60 penalty units (currently $10,904) for each day during which the offence continues.

WIV actions against employers

In 2020, the WIV launched an investigation into Coles Supermarkets Australia (Coles) after receiving a complaint from a former employee who had not been paid their accrued long service leave entitlements when their employment ended.

Ultimately in March 2021, Coles pleaded guilty to seven charges filed by the WIV, admitting that it had underpaid 24 former employees $53,710 between October 2019 and April 2020 after they did not receive their accrued long service leave entitlements in accordance with section 9(2) of the LSL Act. A Magistrate imposed a fine of $50,000 plus costs of $15,000.

The investigation by the WIV revealed that Coles had underpaid more than 4000 employees $700,000 in long service leave entitlements.

For Coles, the main reason the underpayments had occurred was due to a clause in the Coles Supermarkets Enterprise Agreement 2017 (Enterprise Agreement) which provided that long service leave did not accrue during periods of unpaid leave, such as annual leave, personal and carer’s leave. This conflicts with the requirements of section 13 of the LSL Act and therefore rendered the Enterprise Agreement clause invalid. This meant that Coles had failed to correctly calculate long service leave for workers who took unpaid leave and did not pay these workers their full entitlement to long service leave when their employment was terminated.

This month, the WIV has commenced criminal proceedings against two subsidiaries of one of Australia’s largest financial institutions for allegedly failing to pay more than $70,000 in long service leave entitlements to 20 former employees and failing to comply with a notice to produce documents. Again, the allegations relate to the failure to pay out accrued long service leave entitlements on termination. The parent company of the two subsidiaries has said that it has fully remediated the employees that have been included in the proceedings.

In addition, the WIV also has proceedings afoot against other major Australian corporations as well as the labour hire company Allstaff Australia.

What does this mean?

This is a timely reminder for all employers to ensure that they are complying with the relevant LSL Act obligations and to frequently audit their payroll processes and procedures. Some common pitfalls include:

• failing to pay out accrued long service leave entitlements on termination;
• mistakenly ‘freezing’ the accrual of long service leave during certain periods of absence (e.g. annual leave, parental leave and during receipt of workers’ compensation);
• incorrectly calculating the rate of pay for an employee’s long service leave entitlement, particularly when their hours of work have varied throughout their employment period; and
• failing to consider more beneficial entitlements under any registered agreements or pre-modern awards.

The Workplace Advisory and Disputes team at Gadens regularly provides advice about employment entitlements, including long service leave and is able to assist you with any queries, including compliance with the LSL Act and Wage Theft Act.

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Authored by:

George Haros, Partner
Sarah Saliba, Associate
Carlyna Yap, Lawyer