Commonwealth Bank entities fined for underpaying long service leave entitlements

Background

The Wage Inspectorate Victoria launched an investigation into CBA following a compliance audit focused on the finance sector. The audit uncovered underpayments, totaling $1.67 million, affected 529 current and former staff members between January 2012 and January 2021.

The Wage Inspectorate Victoria subsequently brought charges against the CBA entities relating to a small selection of the underpayments discovered during the audit, in circumstances where a number of underpayments were outside the statute of limitations.

The charges

In the Melbourne Magistrates Court, CommSec pleaded guilty to failing to pay more than $38,334 in long service leave entitlements to 8 former employees, with individual underpayments ranging from $1,113 to $10,321. BankWest pleaded guilty to failing to pay more than $22,847 in long service leave entitlements to 9 former employees, with individual underpayments ranging from $521 to $9,957.

Both entities were fined $18,000 each and ordered to pay combined costs of $12,000. No conviction was recorded, in recognition of the early guilty plea and the fact that neither entity had prior convictions. In her sentencing remarks, Magistrate Kathryn Fawcett noted that ‘system errors’ are not an excuse for underpayment and that a company with the resources of CBA should have measures in place to ensure employees are paid their correct entitlements. Magistrate Fawcett went on to say that, if not for the early guilty plea, she would have imposed a combined fine of $80,000.

In February 2024, the Commonwealth Bank and CommSec were fined a record $10.34 million by the Federal Court, after legal action was taken by the Fair Work Ombudsman in relation to the companies underpaying more than $16 million worth of employees’ wages and entitlements.

Key takeaways

This case highlights the importance of ensuring compliance with long service leave laws, particularly for large corporations with significant resources. Failure to do so can result in substantial underpayments, financial penalties, and reputational risk.

Incorrectly calculating an employee’s long service leave entitlement will not usually constitute a contravention in and of itself. However, at the time the payment becomes due to the employee (for example, because they take the long service leave or because their employment ends in circumstances where they have an entitlement to a pro rata payment of their long service leave entitlements), an incorrect accrual can lead to an actionable underpayment claim.

For more information, see the media release from Wage Inspectorate Victoria?here.

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