Can wage theft be criminalised? These legal experts doubt it

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The Labor party wants to criminalise wage theft in Victoria and NSW. But some are warning it could be unconstitutional.

According to MSN, two legal experts from the University of Melbourne suggest a new criminal offence would not deter employers from underpaying workers.

In their research paper, Melissa Kennedy and John Howe warn the proposed state laws could face a constitutional challenge. This is because they could clash with federal laws, they argue, including the Fair Work Act.

“A constitutional challenge could be argued on the basis that federal laws already ‘cover the field’, resulting in any attempts by the states to regulate industrial relations as being ruled inconsistent with the federal scheme and held to be invalid,” Mr Kennedy and Ms Howe said.

‘Significant roadblock’

Ms Kennedy told The Sydney Morning Herald and The Age there were practical and legal hurdles that could undermine criminalisation. She said constitutional issues “appear to be a significant roadblock that will prevent any state governments from successfully enacting state-based criminalisation laws”.

She added: “Research suggests that the deterrent effects of criminalisation are unlikely to be anywhere near as effective as suggested due to difficulties associated with obtaining convictions and the limited resources that are available to bring prosecutions.”

Instead, the researchers say, civil penalties are more practical. The state laws may also “actively harm” the Fair Work Ombudsman’s (FWO) attempts to recover entitlements for workers.

“At a practical level the model proposed by the Victorian State Government is not appropriate to achieve the goals proposed as a regulatory tool,” the research paper says.

A flawed model?

The research paper also suggests that criminalisation might actually be less, not more, effective than civil action.

“It is unclear whether the criminalisation of wage theft has the capacity to lead to increased specific and general deterrence in a manner different to what civil penalties can achieve. As such, criminalisation at a state level as a compliance strategy is ill-advised.

“If there are only a few successful prosecutions and few investigations, it is unlikely that the existence of criminal sanctions will have a deterrent effect sufficient to bring about the changes to business and employer behaviour as hoped by supporters of a criminalisation model.”

Professor John Howe is Director of the University of Melbourne School of Government. He was previously co-director of the Centre for Employment and Labour Relations Law at the Law School. Melissa Kennedy is a research assistant at the School of Government.