The Fair Work Ombudsman has little funding or power to help workers whose wages are stolen – so where do they turn?

'There's no excuse for wage theft': on the frontline of worker exploitation

Toni Buckley says being a victim of wage theft in the hospitality industry “more times than I care to remember” prompted her to take legal action in the small claims division of Melbourne magistrate’s court against her former cafe employer.

A 58-year-old widow with a mortgage, she had been working in the hospitality industry for 20 years when her most recent employer told her and her eight co-workers, with five days’ notice, that they would be unemployed.

“I contacted the Fair Work Ombudsman but was told they really couldn’t do anything as they only act as mediation between the two parties,” Buckley tells Guardian Australia.

“The employer refused to pay redundancy or pay in-lieu-of-notice and had not paid the compulsory superannuation contributions.”

She took the cafe owners to court and a settlement was reached, but she is not allowed to speak about the business negatively as a condition of that settlement and so the cafe cannot be named.

“The exploitation within the industry is rampant and something needs to be done,” Buckley says. “I encourage anybody who is in this position to persevere with their claim.”

A lecturer in work and organisational studies at the University of Sydney business school, Dr Stephen Clibborn, says the Fair Work Ombudsman does not have the funding or the power to deal with the tens of thousands of hospitality workers such as Buckley whose wages and superannuation are stolen by their bosses each year.

“Unfortunately the ombudsman has never been adequately resourced to fulfil that job on its own and it has been going backwards in its funding,” Clibborn says.

Facebook Twitter Pinterest A report says ombudsman processes are not designed to help the hundreds of thousands of exploited migrant workers who are each owed many thousands of dollars. Photograph: Alamy Stock Photo

“The revenue the ombudsman receives from government is considerably less now than five years ago. Part of addressing growing wage theft is having a strong and well-funded labour enforcement agency.”

But not everyone has the time or knowledge to navigate the court system either, he said, especially migrant workers with language barriers or backpackers who might only be in the country for a few months.

Laura Meek, who came to Australia as a backpacker from Scotland in 2015, tells Guardian Australia she has worked at more than a dozen hospitality businesses in Australia. Only one paid her properly. “I have been legally entitled to superannuation payments, a minimum wage, payslips, legal break allowances and penalty rates,” she says.

“In three years of working full-time, mainly in Melbourne, for 16 different companies, my superannuation balance to date sits at $3,000. I have met hundreds of people along the way in these jobs who have been treated exactly the same, and we all know that this is just the norm.”

A paper published in the Australian Journal of Human Rights found despite exploitation of temporary migrant workers becoming a significant human rights concern, ombudsman processes were not designed to help the hundreds of thousands of exploited migrant workers who are each owed many thousands of dollars.

In 2014–2015, a migrant worker who lodged an request for assistance had a one-in-10 chance of recovering their wages, with a 40% chance they would recover less than $1,000, the paper found.

Worker exploitation: without an international minimum wage, we're all worth 10 bucks | Van Badham Read more

“When the likelihood and quantum of a successful outcome are weighed against the time, effort, costs and risks to immigration and/or employment status, it appears rational that individual migrant workers are not seeking remedies even if they are being significantly underpaid,” the paper concluded.

A co-author of the paper, law lecturer Dr Laurie Berg from the University of Technology Sydney, says the ombudsman was configured to encourage workers to self-help. While the ombudsman sometimes provides mediation, these mediations are independent and not designed to “take sides” with the employees, even if they are being exploited, Berg says.

“We have been suggesting more intensive assistance needs to be provided by either the ombudsman or an external agency if more people are ever going to try and recover wages owed,” she says.

“Unions are also trying to assist but sectors like food services have become so hard to organise, because there are so many small operators, it is extremely difficult for unions to organise workers in a space employing a lot of backpackers and international students, as they are transient and from foreign contexts where there is far less faith in unions, and language barriers as well.”

She added that some workers hold the false belief that they are better off being paid cash-in-hand.

“The backpacker tax, which came in one year ago, is also potentially a creeper issue, where backpackers who used to have the benefit of a tax-free threshold are now required to pay 15 cents per dollar earned and employers are required to register that they employ backpackers.

“But it is better to be paying that tax than receiving tax-free cash-in-hand payment, especially if you’re being paid $15 per hour but you’re entitled to $22.”

In a comment piece written for Fairfax in April, an anonymous “industry insider” wrote that “good” cafe owners were forced to do the wrong thing in order to survive in a competitive industry.

“While cafe owners may start wide-eyed and innocent, they are soon educated on how to play the game in order to survive,” the author wrote. “It’s been like this for decades with deceptive practices passed on from generation to generation.”

But Clibborn says owners who cannot afford to pay a living wage to their workers should not be in business.

“There’s a role for the compliant businesses to help highlight the issue by having a big sign out the front of their cafe advertising the fact that their business complies with employment law,” he says. “They could put it next to their ‘fair trade’ coffee sign.”

The owner of Finders Keepers cafe in Hawthorn, Sean Minter, says he and his wife Kirsten have taken on dozens of staff from other cafes who were exploited by their previous employers. Minter says it is financially challenging to run the business, but he has no sympathy with the view that exploiting staff is necessary to survive. He describes wage-theft as “rife”.

“We chose to open a cafe, we chose to work in this industry ... there is no excuse for wage theft,” he says. “There is no excuse for lining your own pockets with the money you should be paying your staff, for putting them at risk by not providing them WorkCover insurance, for limiting their future by not paying them super, or for putting a strain on our welfare system by pushing more and more staff towards claiming Centrelink payments.”

Whenever Minter hires new staff he asks them what their previous employer was paying them. Not one person in the four years his cafe has been open have said they had previously been paid the award rate, he says.

“One of the guys we just hired has come to us after having his shifts blacked out on the roster after asking to be paid penalty rates,” he says.

Minter was recently advised by his accountant that his business may be audited by the Australian Tax Office as his profit margins were so low compared with the industry benchmarks that tax officers may assume he is “skimming” cash off the top.

“The exploitation makes for an unfair playing field. It makes customers think we are charging too much when we are simply charging what we need to ensure that our staff are paid and our kids are fed,” he says.

“We live week-to-week and regularly have to dip into our savings to pay our bills. But it is not up to us as cafe owners to determine who should and shouldn’t be paid correctly. We aren’t above the law.”