In Summary

  • This is an opinion piece by Mirko Bagaric, Professor of Law, Swinburne University of Technology that was originally published in The Australian

Empirical evidence establishes that harsh penalties do not result in enhanced compliance with the law. The criminal law should also be reserved for the most harmful types of acts.

These are compelling reasons for not making wage underpayments a criminal offence.

Reflexive laws in response to high-profile events rarely produce just or effective outcomes.

This is certainly the case in relation to the proposal by the federal government to criminalise wage “theft” following the mass media attention directed to the $8 million underpayment by ­MasterChef judge George Calombaris.

It is incontestable that underpaying staff is a serious matter and that systems should be in place for employees to efficiently recoup salary shortfalls.

However, there are far more principled and effective solutions to this problem than passing laws that will result in the jailing of some employers.

The proposal to criminalise wage underpayment follows a regrettable tough-on-crime approach that has defined criminal law reform in Australia for several decades. The narrative is always similar. Harm is caused to a person; the event draws media attention; many members of the community express anger at the behaviour and laws are passed to criminalise the behaviour or increase the penalties for the conduct.

Australians are suffering because of this policy-free and jurisprudentially flawed approach to criminal justice.

Incarceration numbers are the highest in history and in some jurisdictions, the growth in government spending in prisons exceeds that in health and education. It costs the taxpayer more than $100,000 a year to imprison each offender. And, worse still, crime rates are not dropping.

Given the individual toll and societal cost involved in imposing criminal sanctions, a clear rationale needs to exist before we criminalise conduct.

Prisons should be reserved for people who commit acts that cause the most grievous forms of harm to other people, not for people who simply anger us, like bosses who underpay staff. Victimology studies establish that the most harmful acts are physical and sexual assaults — victims often never fully recover from these acts.

By contrast, wage underpayment is at its core primarily a contractual matter.

Yes, it causes harm but so do nearly all contractual breaches, such as a failure to pay for all services rendered by people outside the employment construct.

A bricklayer, electrician or cleaner who is not paid for two weeks’ contractual work suffers no less than an employee who is underpaid by a similar amount.

Moreover, wage underpayments are economically and legally no less damaging than wilful failures by staff to meet their KPIs or systematic employee time “theft”, in the form of feigned sick leave or habitually attending to personal matters (such as social media) while at work.

Employers need to be in their offices sustaining and expanding their businesses; not in prison where we pay $100,000 a year to house them and where they are precluded from generating revenue to pay workers (including back pay for underpaid workers).

Further, harsh sanctions do not reduce the incidence of illegal behaviour.

The theory of marginal general deterrence has been scientifically refuted. Drug distribution offences can attract terms of life imprisonment, yet drugs are effectively available on every street corner. Illicit drug use has increased since the penalties for trafficking drugs have increased.

The empirical data shows that the only way to encourage people to comply with the law is to put in place mechanisms to detect breaches of the law and increase the perception in the minds of people that if they breach the law they will be caught.

It is for this reason that traffic cameras have been so effective at lowering speed limits. The nature and size of the possible penalty is, at best, a peripheral consideration.

No employee should be short-changed by their boss. But putting some employers in jail will not result in a single employee receiving more money.

It will simply add to the taxpayer burden of sustaining growing numbers of prisons, fracture more families and cause additional friction in workplaces.

Rather than implementing sure-to-fail populist reforms to deal with the problem of wage underpayments, the government should put in place intelligent, research-based changes that will enhance the lives of many workers.

The most effective way to deal with bosses who deliberately underpay staff is to legislate a mechanism through which infringement notices can be issued against them imposing (civil) fines, commensurate with the level of underpayment.

At the same time, a process should be established whereby all claims for unpaid wages should be resolved within 30 days of the lodgement of an application.

This will enhance employer diligence in relation to the payment of wages, while not further compromising the integrity of the criminal justice system.

Headline-grabbing political responses often have short-term appeal but are never an effective substitute for sensible, effective action.

Mirko Bagaric is Director of the Evidence-Based Sentencing and Criminal Justice Project at Swinburne University of Technology. This opinion piece was originally published in The Australian.