Wage theft – now that is a real crime

In Australia, the Fair Work Act has now been enhanced from January 1st to provide for jail time and large fines for individuals and companies who can be proved to have “deliberately” underpaid their workers. This is a federal act that has a body dedicated to investigating allegations. This sounds more like a real crime than the silliness of Mark Mitchell wasting police time by confiscating the tee-shirts of tweens.

The ABC summaries this legal change in aussie as..

Australian bosses could go to jail for 10 years and be fined $1.65 million if they “deliberately” underpay their workers, as part of new laws that nationally criminalise wage theft from January 1. 

The new laws and penalties follow years of underpayment scandals in Australia, with cases at prominent employers including Woolworths, Chatime, Qantas, NAB, BHP, 7-Eleven and the ABC.

Until now, the federal body that investigates wage theft has only been able to go after companies and their directors using civil laws, which don’t come with the threat of jail time.

Now Fair Work will be able to go after them using criminal laws too. 

But it will have to prove that the employer intentionally avoided paying a worker appropriate wages and penalties, superannuation or other entitlements.

The responsibility of employers should be absolute to pay their employees correctly according to legislation like the minimum wages or employee contracts or unions negotiated awards. Like Australia, it is not clear in New Zealand law that systematically and deliberately failing to pay employees correctly is simply criminal theft. Instead, the enforcement of non-payment of earned income to employees is left almost entirely in civil law.

That cases in Australia in recent years have been compelling, that not only individuals as employers, but that whole private and public corporations who have indulged in wage theft to enhance their bottom line. In some cases, the techniques have been egregious. For instance the 7-Eleven wage theft.

Mr Victory says companies that engage in “wage cashback” could be in Fair Work’s sights.

Wage cashback schemes typically impact vulnerable migrant workers who are desperate to secure a visa.

It involves them being forced to withdraw money they’ve been formally paid and hand back the cash to bosses.

These allegations came to light during the 7-Eleven scandal that brought wage theft into the national spotlight.

The key to the Australian Fair Work Act changes is the concept of criminal deterrence for the few organisational and individual employers who do wage theft. At present, like here, Australian employers engaging in deliberate wage theft can only be fined and required to pay restitution at a civil legal level. However this is largely a meaningless exercise.

The most extreme example in Australia was probably the decades long saga by companies in the Sushi Bay group, who between 2016 and 2020 underpaid employees at least $650,000. This was after being ordered to pay a $100,000 fine in 2019 for the same offence between 2015 and 2016. The 2020 penalties came to $15.3 million – in a 2024 judgement. Needless to say the companies are in liquidation, the owner referred to the taxation and other authorities, and no person held criminally liable for activities like:-

Records, including pay slips and payroll advices which did not record the actual working hours and rates of pay, had also been falsified in an attempt to conceal the underpayments, court documents revealed.

“The creation and maintenance of these documents shows that the overwhelming majority of the contraventions were committed deliberately and intentionally,” Justice Katzmann wrote in her judgement. 

It is unlikely that anyone would be held liable for this clearly criminal theft against employees because there were no clear laws that cover this kind of theft of the time of employees. The employees, one owed as much as $83,968, are unlikely to get any restitution because of the retreat of companies, directors and owners into liquidation and bankruptcy.

It isn’t hard to pick similar deliberately criminal behaviours amongst some employers in NZ. Please feel free to link to examples in the comments. We also don’t have any clear criminal laws against our own employer thieves. We also have even slower civil (and employment) court proceedings against employers than the Australians

Criminal laws are the primary deterrent against theft of property. However the criminal law in NZ on wage theft is effectively non-existent. We have criminal laws against the theft of an employee against an employer. But no clear criminal convictions for the theft of payment for time and attendance by an employer against an employee. There is limited deterrence against people who have the financial property to maintain delaying actions

There is a private members bill by Labour MP Ibrahim Omer that was drawn in the last term of Parliament in 2022. The Crimes (Theft by Employer) Amendment Bill is a simple bill that adds a clause 220AA “Theft by employer” to the Crimes Act 1961 that targets intentional wage theft by a individual or organisation against an employee employed under a employment contract or relevant legislation. Camilla Belich has taken over guiding this members bill through parliament.

The bill has a minimal (compared to aussie) set of penalties for an individual employer of up to a year of imprisonment and/or a fine of up to $5000. For a non-individual employer a fine of of up $30,000. Presumably in addition to any restitution to the victim employees under existing acts. While not a large deterrence, this would certainly add up as these would be the maximum penalties for each offence.

Which in theory should act as a significant deterrence for both organisations and individuals. However fines tend to be pretty useless in the event of a liquidation or receivership. That is because of the existing ambiguity and conflict in the sections 303 and 308 of the Companies Act – see discussion by insolvency specialists Waterstone “The vexed question of fines in a liquidation”.

But the deterrence value of a potential prison sentence against theft by an employer to an employee has value, especially since parliament has been so legally negligent in the Companies Act. Especially if case law applied that to owners and/or directors.

You can see why National and Act, with their completely hypocritical attitudes about the value of the employees property (their time and effort), were unambiguously opposed moving forward with a criminal offence for wage theft in the majority opinion of their stacked select committee and second reading of bill the earlier this year. A viable criminal offence bypasses the financial protections of bankruptcy actually provides some criminal deterrence the frauds that are commonly used by deliberately negligent and unlawful behaviour of employers.

This is quite apparent in the Hansard transcript of the second reading, and the rather strange position that wage theft from employees by employers was not a offence of dishonesty from the National/Act majority in the select committee report.

Despite this, the second reading passed because of New Zealand First voting for the bill to be sent through to the third reading by the whole of the house. I’ll leave picking the juicy parts of the second reading’s more stupid blathering to commenters (the National MPs appear to be completely ignorant of what a private members bill is for instance). However I am going to point out the NZ First MP Mark Patterson who spoke last. My italics

It is New Zealand First’s view that there are two clear anomalies in the law. It is already a criminal offence for wage theft of immigrant workers on work visas. New Zealand First cannot see why New Zealand citizens or permanent residents should not be afforded the same process of legal redress. Secondly, it is a criminal offence for an employee to steal from an employer. This, to us, seems an inequity.

So New Zealand First will be supporting this bill through to the committee of the whole House stage. We, however, have listened carefully to the concerns on this side of the House. There are some things that we want to see examined further through that committee stage. This bill must focus on real crime—intentional and malicious acts of theft by employers, not unintentional mistakes or delays to the cash-flow issues. Without clear distinction, the risk is that honest employers facing financial hardship may be unfairly penalised.

Moving this issue from a civil to a criminal jurisdiction changes the burden of proof for both employees and employers. Criminal cases require more evidence and resources, potentially straining the justice system while making it conversely, potentially, harder for workers to successfully pursue cases.

Further, we believe that the shift from the balance of probability to beyond reasonable doubt will increase the difficulty for employees to prove theft by employers. The higher threshold could mean fewer successful prosecutions. This requires further investigation to ensure that the bill truly benefits employees, without creating unintended consequences.

So New Zealand First is eager to ensure this bill does go to the committee stage and does get tested by all parties in this Parliament. We will remain engaged in working through the finer details. I’m sure the member will help us to alleviate some of those concerns.

At it’s very core, we believe that business is about paying and being paid. A fair day’s work deserves a fair day’s pay, and you should be paid. So, with that, we’ll commend this bill to the House.

That was a good result. Ayes 63 New Zealand Labour 34; Green Party of Aotearoa New Zealand 14; New Zealand First 8; Te Pāti Māori 6; Tana. Noes 60 New Zealand National 49; ACT New Zealand 11.

Some of Patterson’s speech was strangely vague in the traditional NZF style. Hopefully this confusion will get cleared up while proceeding to the third reading.

For instance, Mark Patterson appears to think that having a criminal prosecution would somehow impede the existing civil processes of existing legislation in civil and employment law. It should not, as those are about restitution to the employee. Employees will be entitled to proceed with whatever complaints that they currently can. Criminal cases often proceed side-by-side with more cavil or administrative cases.

Patterson seems to have the impression that employees would be doing the criminal prosecution. Which is highly unlikely. It makes much of his worries moot because this bill makes it easy for employees to make a complaint about an alleged criminal offence. It doesn’t make it easy to get a prosecution.

Prosecutions in NZ are most often launched and done by the Police Prosecutions Service for the Police Commissioner or Crown Law Office on behalf of the Solicitor-General. Both of whom concentrate on achieving successful prosecutions in the courts. Which means that frail cases would be unlikely to proceed. Both have the investigative powers to build a case and to determine if it is viable in court before even presenting a prima facie case for a prosecution.

Sure, it is possible that an employee could bring their own private prosecution. It is hard to see how they would be able to assemble the prima facie case without the solid investigative authority to get accounting documentation from employers required for a court to accept the case.

Besides to mount a private prosecution has considerable up front costs for processes like filing documents required to bring a case to the court. The characteristic of a aggrieved employee is usually that they are short of financial resources The costs can be pretty high, even if the aggrieved employee chooses to represent themselves. It is likely an employer would have the legal representation. There is also the high risk having costs awarded against the respondents legal costs in the event of an unsuccessful private prosecution.

Both here and in Australia, it is likely that theft by employer legislation is only going to be used against the most egregious of employers, and it is likely to be done in a legally professionally manner and to provide an deterrent for the kind of copycat criminality that the current criminal law fosters amongst poor employers. Like all criminal law, that is what keeps our societies and economies safe – the rule of law guarding the bounds of behaviour.

Perhaps parliament should also look at the Companies Act about court ordered fines at some point.