State Labor Governments Defend Wage Theft Laws in High Court Challenge

Key Takeaways

1. State Labor governments are defending Victoria’s wage theft laws, asserting their compatibility with federal regulations and the need for coexistence amid a looming federal crackdown on wage theft.
2. The case at the heart of this legal battle involves a Victorian restaurant accused of dishonestly withholding wages, penalty rates, and superannuation, with potential consequences of up to 10 years in prison and hefty fines for individuals and companies under state law.
3. Lawyers representing the restaurant challenge the validity of state prosecutions, citing constitutional inconsistencies, while state governments argue that the two sets of laws can harmoniously coexist without undermining each other.
4. Employers face significant uncertainty as this legal battle unfolds, potentially subjecting them to multiple criminal regulatory frameworks and penalties, emphasising the need for clarity and coordination between state and federal jurisdictions.

The Macedon Lounge Case 

State Labor governments have intervened in a High Court challenge by a Victorian restaurateur against Victoria’s wage theft laws. The States argue that their laws can coexist alongside federal underpayment laws. This legal showdown comes as the Albanese Government plans to introduce federal sanctions that could result in up to 10 years in prison and maximum fines of $8 million for wage theft convictions. 

This case centres on the Victorian restaurant Rehmat & Mehar Pty Ltd, trading as The Macedon Lounge and its owner. They are facing 47 charges each under the Victorian Wage Theft Act. These charges allege that they dishonestly withheld over $7,000 in wages, penalty rates, and superannuation from four young workers for four months last year. Under the Victorian Act, individuals could face up to 10 years in prison, while companies could be fined over $1 million. 

The Challenge: Constitutional Inconsistencies 

Lawyers representing the restaurant argue that the investigation and prosecution by Wage Inspectorate Victoria Commissioner Robert Hortle are invalid under Section 109 of the Australian Constitution. This section says that federal laws take precedence over inconsistent state laws. The core of their argument is that the Victorian Wage Theft Act contradicts the Fair Work Act, potentially invalidating criminal prosecutions under the state law. 

State Labor Governments’ Position 

The attorney-generals of New South Wales (NSW), Queensland, South Australia, and the Northern Territory have intervened, backing the view that there’s no direct inconsistency between the Fair Work Act and the Wage Theft Act. They say the Victorian law creates indictable offences that allow for criminal penalties on employers who engage in wage theft and other unfair labour practices within Victorian businesses. They stress that the Fair Work Act explicitly recognises the possibility of both civil penalty proceedings and criminal proceedings for broadly similar conduct, indicating that the two laws can work together. 

Understanding the Purpose of Wage Theft Laws

According to the submission made by the NSW Attorney-General, the main aim of the Victorian Wage Theft Act is not to fix non-compliance with the Fair Work Act but to establish offences related to the theft of employee entitlements and maintaining accurate employee records. These state laws primarily focus on accountability through criminalisation and applying criminal penalties, including retribution and denunciation. 

Implications for Employers 

The outcome of this legal battle will have significant consequences for employers. If the High Court favours the state wage theft laws, employers could be exposed to multiple criminal regulatory frameworks, including potential imprisonment and substantial fines, under state and federal jurisdictions. The Albanese Government’s proposed “Closing Loopholes” legislation, possibly introducing up to 10 years in prison for wage theft, adds complexity to the landscape.

Business Concerns and the Call for Clarity

The business community is concerned about the possibility of overlapping offences and penalties. They advocate for a more transparent and coordinated approach between state and federal jurisdictions to avoid confusion and ensure a consistent legal framework. Businesses call for any new federal wage theft criminal offence to explicitly override comparable state offences, providing unambiguous guidance.

The outcome of this case not only affects the future of wage theft prosecutions in Victoria and has broader implications for businesses and workers across the country. As this legal saga continues, employers, employees, and legal experts closely monitor the proceedings to see how the court navigates this intricate web of jurisdiction and criminalisation within the Australian legal landscape.