CBA hit with record $10m fine for knowingly underpaying staff
Justice Bromwich of the Federal Court said the penalty amount will serve as a warning to financial companies with inadequate compliance systems.
CBA and its subsidiary CommSec have been ordered to pay fines amounting to $10.34 million by the Federal Court for underpaying staff, including some "serious contraventions" of the Fair Work Act.
In all, over 7,400 employees were underpaid to an overall amount of $16 million. The penalty was the highest ever secured in a legal action brought by the FWO.
“The message needs to be loud and clear that this is not good enough and will not be tolerated,” wrote Justice Bromwich in his judgment.
The offending took place over five years from late 2015 to early 2021. CBA and CommSec admitted to the wrongdoing during pre-trial negotiations. The brunt of the disagreement concerned the characterisation of the contraventions, rather than whether they took place, said Justice Bromwich.
Despite being “put on notice of potential compliance issues,” senior staff at the companies failed to implement the required checks and safeguards around employment agreements.
Not only did senior leadership fail to pay certain employees their entitlements, but the CBA admitted to misrepresenting to employees that their interests would be better served under individual agreements as opposed to enterprise agreements.
The companies failed to ensure that employees were better off overall on individual agreements, as opposed to applicable enterprise agreements.
Not only did senior leadership fail to pay certain employees their entitled amounts under their individual agreements, but the CBA admitted to misrepresenting to employees that their interests would be better served under the individual agreements.
“These were substantial and prolonged contraventions by large and wealthy financial institutions who were amply able to prevent anything of this nature occurring in the first place, let alone over such a substantial period of time,” wrote Justice Bromwich.
More than it being a case of individual bad actors, Justice Bromwich said the FWO established a systems failure.
“The problem with the arguments advanced by CBA and CommSec is that they focus in key parts on the nature of the errors and misunderstandings that led to the contraventions taking place, rather than focussing on the systems and processes that allowed that situation to arise in the first place,” he said.
Fair Work Ombudsman Anna Booth said the case highlighted the consequences of having a “poor corporate culture towards compliance,” adding that the cultural shortcomings are widespread across many “large corporate employers” in Australia.
Justice Bromwich said no amount within the allowable range would be likely to “materially hurt either CBA or Commsec,” but that it would send a message of deterrence.
“Other employers, and especially large employers in the financial services sector, must be made aware that it is simply not worth the candle to have inadequate compliance systems in place,” he said.
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