The 10-million-dollar compliance mistakes CBA made, and how to avoid them

Managing a workforce of any size is tricky; add in complying with intricate employment laws, and it gets even more complex. The recent case involving the Commonwealth Bank of Australia (CBA) and its subsidiary CommSec, has served as a reminder for employers of the critical importance of ensuring your business is compliant and the severe consequences for failing to do so. It’s also resulted in the highest penalties ever secured by the Fair Work Ombudsman (FWO) via legal action.

Here, our experts explain the crux of the case and its impacts, and we share best-practice tips to avoid making the same mistakes.

What happened?

After a thorough investigation and prosecution, the FWO secured a record $10.34 million in penalties against CBA and CommSec for serious contraventions of the Fair Work Act (FW Act) that resulted in employees being underpaid to the tune of $16 million. Proceedings uncovered that both organisations knowingly and systematically committed serious contraventions of workplace laws.

So, how did it all go so wrong?

In the case of CBA and CommSec, they failed to meet three key compliance standards. These were:

1. Inadequate checks and safeguards: both organisations failed to use sufficient checks and safeguards to ensure the lawful implementation of enterprise agreements and Individual Flexibility Arrangements (IFAs).
2. Lack of reconciliation systems: the companies did not implement systems for reconciliations and top-up payments to ensure employees received lawful minimum entitlements.
3. Misrepresentation of information to workers: there were instances where workers were misled into believing they were better off under IFAs.

There’s no grey area when it comes to compliance and even though the organisations both self-reported to and cooperated fully with the FWO, they still received record-breaking fines. Fair Work Ombudsman Anna Booth said, “The employees ultimately should’ve been paid correctly in the first place.”

The failure to meet the most critical of compliance standards highlights that the presence of a poor corporate culture towards compliance can result in serious financial and reputational consequences. Despite being well-resourced, CBA and CommSec were criticised for their poor attitude towards ensuring correct payments, with senior managers failing to address non-compliance issues promptly.

The introduction of new Wage theft laws

An important change arising from the Fair Work Amendment Closing Loopholes Act 2023 is the introduction of a federal criminal offence of wage theft. An employer will commit wage theft in circumstances where they intentionally engage in conduct that results in the failure to pay an employee their minimum statutory entitlements arising from the FW Act or an industrial instrument such as a modern award or enterprise agreement.

The penalties arising from a finding of criminal wage theft are significant. The offence will carry a maximum of 10 years’ imprisonment and/or a maximum fine of the greater of:

• three times the amount of the underpayment; or
• for an individual, $1,565,000 or for a body corporate, $7,825,000.

This matter serves as a timely reminder that the FWO takes the underpayment of employees extremely seriously, and from, 1 January 2025, such actions may carry criminal penalties under the federal wage theft offence.

The lesson: be proactive, not reactive

This case highlights the vital importance of following workplace laws – it’s not just about legality, but also ethics. Businesses can steer clear of compliance pitfalls by prioritising adherence and setting up robust systems. Employers need to ensure they pay their employees correctly by establishing reliable processes. Failure to do so can lead to serious repercussions like legal action, damage to reputation, and hefty fines.

Being proactive, not reactive is the key takeaway from this case. All employers should take proactive steps to ensure compliance with workplace laws. Waiting for issues to arise can lead to significant financial and reputational damage. That’s where we come in. Citation HR Software will keep you compliant with hundreds of legally sound, best-practice templates, documents, policies, and workflows. This, along with our 24/7 HR Advice Line, will ensure you are always compliant, now and in the future.

Uncertain about workplace compliance? Talk to us

If any of the information in this article has raised questions or concerns about workplace compliance or you have another workplace matter you need assistance with, please reach out to our experts here.

About our author

Sebastian Diaz is a Workplace Relations Advisor at Citation Group. In his role, Sebastian regularly provides advice on workplace matters to find solutions for clients.