Victoria's election result will determine whether bosses who underpay staff face jail

Updated

Aaron Farrugia no longer works at the popular vegan restaurant Smith and Daughters in the inner Melbourne suburb of Fitzroy, after a recent roster change left his name off it.

It's left a bad taste in his mouth.

In May, he had approached the owners on behalf of other staff members, asking why they were being underpaid.

Matters of State Underpaying workers - oversight or jail time?

Victoria could be about to jail bosses who underpay their staff. Why aren’t we talking about it? More episodes



Victoria could be about to jail bosses who underpay their staff. Why aren’t we talking about it?

The first approach was a text message to the co-owner, Mo Wyse.

"I didn't really get a response from that," he said. "And I think that angered a lot of staff.

"So we sent an email to the bosses just requesting that they assess everybody's pay and rectify it immediately."

The email asked the owners to respond in 14 days.

But two weeks later, nothing had changed, he said.

"So then we collectively got together and sent them the next email and still nothing changed. And that really outraged some of the staff."

Mr Farrugia and his co-workers had checked their rates of pay after watching the hospitality industry's open secret blow up in public around them.

Celebrity chefs and corner cafes were caught up in a deluge of underpayment claims from workers — from kitchen staff working 100-hour weeks but being paid for 38, to waiters who lost their share of tips to pay for breakages.

Mr Farrugia and his colleagues at Smith and Daughters realised they were also being underpaid at hourly rates below the award, and not receiving the penalty rates they were entitled to.

"We didn't want to believe that the bosses were doing it intentionally," Mr Farrugia said.

"They really try to promote themselves as having this family atmosphere, and being this organisation that really looks after their staff. They weren't doing that behind the scenes at all.

"We tried to keep it informal at first, just assuming it would get corrected, but it didn't."

Eventually, Mr Farrugia received $7,000 in backpay from Smith and Daughters. He says others waited longer.

In a statement, Smith and Daughters' owners Mo Wyse and Shannon Martinez told the ABC the restaurant had conducted an extensive audit of its books, and had since reimbursed staff for any underpayments. It had also put in place new systems to prevent it from happening again.

They said they strongly condemned wage theft by employers and had apologised to their staff.

This year, the Fair Work Ombudsman revealed that while hospitality workers make up 7 per cent of the workforce, they comprise nearly 40 per cent of complaints about underpayment.

In May, a new union called Hospo Voice launched specifically for the hospitality industry.

It piled on the pressure, exposing employers who ripped off staff, holding protests outside venues, and setting up a website for hospitality workers to tip off others about employers who underpay.

But Mr Farrugia said for all the attention on underpayment in hospitality this year, the problem is not going away — and it's still no easier for workers to get the wages they're entitled to.

"I'm starting to notice that finding another job in the industry means that I have to potentially go through this all over again," he said.

'Silent underclass of unpaid migrant workers'

It's not just a problem for people like Mr Farrugia.

Hospitality employs thousands of foreign students, and that's a problem for the whole of Victoria, Migrant Workers Centre director Matt Kunkel said.

"Education is one of Victoria's big exports. And it's at risk," Mr Kunkel said.

Education is Victoria's largest services export industry, worth more than $9 billion in revenue from foreign students.

"Students are coming to Victoria and Australia, and they are the victims of wage theft," he said.

"The bosses are treating them badly. We saw just today some people … advertised for as little as $10 or $11 an hour, and it risks Victoria's reputation as a good place to work and study."

Laurie Berg, a researcher in migrant workers at the University of Technology Sydney, said Australia had "a silent underclass of hundreds of thousands of underpaid migrant workers".

"If we want students to come to Australia over other destinations, then I think we need to make urgent change to make sure that they they're not exploited — and that they can come forward when they are," she said.

She and her colleagues from the University of New South Wales surveyed more than 5,000 workers and found that while more than half of them knew they were being underpaid, only one in 10 took any action to do something about it.

Australia's Board of Taxation estimates illegal jobs and underpayment in Victoria add up to about $2 billion.

That's money not going into taxes and crucial infrastructure like roads, hospitals and schools.

There is no shortage of jobs for foreign students.

Hundreds are advertised on social media sites such as Facebook every day.

Most are for illegally low rates of pay, and most are not in English.

"It's out of the eye of the regulators," Mr Kunkel said.

"So it's very difficult for those people whose job it is to actually regulate these kinds of things to get in there and do this work."

This year, Victorian Premier Daniel Andrews announced his Government would go where no other government in Australia had gone before — promising to make underpayment a criminal offence, punishable by massive fines and up to 10 years in prison.

'Wage theft' versus 'underpayment'

The Opposition does not support the Government's proposal.

When it was announced, Liberal spokesman David Hodgett called it "a fairly sad and transparent and unnecessary attempt to appease the union movement in the lead-up to a state election".

Do you know more about this story? Email vicindepth@abc.net.au

Employer groups are also opposed — not just to the idea of making underpayment a crime — but also to the union's preferred term for it: "wage theft".

"[It's] not theft," said Steve Smith, the head of workplace relations policy at the employers' organisation Australian Industry Group.

"Someone is not coming along … breaking into your house and stealing something," he said.

"We think it's an overly emotive term that's inappropriate. No-one is condoning underpayments, but that's what they are — wage underpayments. And it's appropriately dealt with by hefty civil penalties, which is what we already have."

But Mark Wooden, from economic and social policy thinktank Melbourne Institute, believes those regulations are not being enforced.

"The laws are fairly toothless," he said.

"That's really because the policeman here, the ombudsman, doesn't have a lot of resources. So they can only really look at places where there are complaints.

"And even then, they probably target the ones where the evidence is strong."

But Professor Wooden said the idea of making wage underpayment a criminal offence, especially with such heavy penalties, was not the way to get employers to do the right thing.

"What we want them to do is to feel that they can come out and admit it," he said.

"That's the sort of behaviour we want to encourage. What we don't want to do is to make an incentive for everyone to cover everything up."

Last week, the Hospo Voice union published the results of a poll it commissioned through ReachTel that found 85 per cent of voters believed employers who deliberately stole from their workers should face jail time.

Mr Farrugia is one of them.

"I think it's really important that it gets recognised as theft because at the moment it's not really seen that way. But essentially that's what we're talking about," he said.

"You underpay your staff for as long as you can and then when you get caught you do the bare minimum to fix it. Then because there is no real oversight it's just really easy to let it slip and go back into past behaviour."

Topics: state-elections, hospitality, unemployment, unions, food-and-beverage, vegetarian, vic, melbourne-3000, fitzroy-3065, australia

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