Commonwealth Bank fined $36k after pleading guilty to not paying long service entitlements to staff

Australia’s richest company has been fined $36,000 after pleading guilty to failing to pay long-service benefits to employees.

The Commonwealth Bank is one of the country’s largest private sector employers and made a profit of $9.5 billion last year.

But on Monday she faced the humbling experience of appearing in Melbourne Magistrates Court alongside shoplifters and drink drivers after a successful case brought by the Victorian government’s wages inspector.

The mitigation requests were similar in many respects: remorse, remorse and no prior convictions.

The judge said there was “no proper excuse”.

In 2022, a government agency that pursues wage theft, the Victorian Wages Inspectorate, alleged that Bankquest and CommSec broke the law by failing to pay more than $69,000 in long-service leave benefits to 23 former employees.

At Monday’s court hearing, the number was reduced to 17.

For individuals, the amounts ranged from $500 to over $10,000. Most amounts were over $1,000.

Before Judge Catherine Fawcett, the bank’s lawyers entered guilty pleas to the criminal charges.

The bank spent more than $1 million to fix the problem and agreed to pay $12,000 to cover the wage agency’s legal costs.

“There should be no negligence or failure in the system.” [given as] “It is an answer to the inability to pay employees,” Judge Fawcett said in his sentencing.

The judge said no conviction would be recorded because the Commonwealth Bank had no previous convictions for breaching Victoria’s long service laws.

Fines of $18,000 were imposed on both entities, far less than the $1.2 million imposed on Woolworths for similar crimes that affected a much larger group of employees.

The judge said the bank’s early guilty plea avoided what would have been a “larger total fine of $40,000” for each entity.

Investigation reveals hundreds of employees receiving less than their actual financial dues

The investigation revealed that Commonwealth Bank companies underpaid long service leave entitlements to 529 of its current and former employees by $1.673 million.

But it is not a crime under the law unless the former employee is an employee, that is, when the person does not receive his dues when his employment ends.

In a statement, a spokesman for the Commonwealth Bank of Australia said the bank had “cooperated with [Wage Inspectorate Victoria’s] investigation”.

“These issues should never have happened, and we once again apologize to our people who were affected by these previous mistakes,” the company said.

“We have compensated approximately $60,000 in underpayments, plus interest, to the 17 former employees who are the subject of the proceedings.

“We have invested significant resources in improving our systems and processes to address the risk of non-payment of employee benefits.”

Underpayments to people still employed by the Commonwealth Bank had to be corrected, but this is not an offence under the law.

The law in question is section 9(2) of the Victorian Long Service Leave Act 2018 and the maximum penalty for each offence is 60 penalty units ($10,904) for each day the offence continues.

The Agency has been successful in similar cases involving long service leave rights against: Woolworths, Coles And Optus.

That may not seem like a lot of money, or a lot of employees, given the bank’s roughly 50,000 employees. But in most cases where it was done this way—and in this case in particular—the companies involved then conducted audits of all employees who might have been affected by the breach, and compensated those whose wages were stolen.

complex problem

Stephen Claiborne of the University of Sydney Business School has been investigating wage theft for the past decade.

“My research with organizations like this and others tells me that many of them have not put enough effort or resources into ensuring their compliance,” Dr. Claiborne said.

Beyond the fact that compliance with the law is a basic requirement, the argument about complexity ignores what Dr. Claiborne says is a key point: companies do very complex things all the time.

Qantas maintains a global air fleet while Woolworths and Coles operate thousands of perishable product lines across an entire continent.

He offers another example: “It is accepted by many organizations that tax laws are complex, but they make the effort to ensure compliance, pay for the advice they need, and have the necessary systems in place.”

“This does not appear to be the case with labor laws.”

What do these fines mean for the bank?

Fines are unlikely to deter companies that can make billions of dollars in annual profits.

Coles was fined $50,000 in 2021 for what Judge Justin Foster described as a “systemic failure” to ensure employees received their full long-service leave entitlements.

In May, the service company flawless Optus was fined $12,000, and last month Optus was fined $13,000 and ordered to pay $15,000 in costs.

But Justice Nahrin Warda’s ruling in April caught the attention of Australian businesses, after supermarket giant Woolworths was fined $1.3 million for underpaying more than 1,000 employees in long-term leave.

Judge Warda described the situation as a “systemic and widespread failure” by one of the country’s largest employers.

“A company as large as this, expanding across Australia, would be expected to have comprehensive payroll systems.”