Commonwealth Bank’s standing in the Australian community has taken another hit following a decision by the Fair Work Ombudsman to institute civil penalty proceedings against the company for underpaying more than 7,000 staff.
The ombudsman filed a statement of claim against the scandal-prone bank in the Federal Court on Friday, alleging it failed to pay customer service and administrative staff A$16.44 million in entitlements over five years to the end of December last year.
The legal action also applies to several thousand Commonwealth Securities employees.
“We allege that CBA and CommSec failed to meet their lawful obligations to ensure employees were better off overall, which led to thousands of CBA and CommSec employees across the country being financially disadvantaged year after year,” said Fair Work Ombudsman, Sandra Parker.
“Businesses have a responsibility to their employees, customers and the Australian community to get it right by prioritising workplace law compliance, investing in their payroll systems and conducting audits.
“Boards should treat the lawful payment of their employees as a core governance requirement.”
The FWO alleges in the statement of claim that CBA and CommSec “knowingly failed to comply” with industrial undertakings aimed at ensuring that staff employed under Individual Flexibility Arrangements were better off overall.
However, thousands of staff were short-changed because the bank failed to audit its pay practices.
While CBA and CommSec have remediated most employees impacted by the pay breaches, the ombudsman has instituted the civil penalties action because they appear to meet a “serious contraventions” threshold of the Fair Work Act aimed at protecting vulnerable workers.
According to FWO, the bank’s alleged conduct also had a “systematic nature”.
The alleged breaching by CBA and its subsidiary is potentially compounded by allegations that the bank misled staff in June 2018 and August 2019 that they would be better off overall by agreeing to enter individual flexibility arrangements.
FSU national secretary Julia Angrisano said the bank deserved to “have the book thrown at them” because there was no better example of wage theft in Australia.
“FSU members know that CBA systematically misrepresented Individual Flexibility Arrangements as ‘contracts’ to undermine the terms of the enterprise bargaining agreement, effectively lining shareholders’ and executives’ pockets with stolen wages for almost a decade,” she said.
“Now the FWO know it too.
“We also know that once they’d been caught, they lied to workers to get a new EBA over the line that effectively legalises the same conduct.
“They lied about the IFAs, they knowingly breached the clauses that were designed to offer some protection, and then they lied again to have people who didn’t fully understand their workplace rights, vote for an agreement that legalised the same conduct into the future.”
In a statement to the ASX the bank acknowledged that underpayment of staff was unacceptable.
However, CBA did not address the allegations made by the ombudsman that the bank misrepresented to employees in 2018 and 2019 the impact of the IFAs.
“A comprehensive remediation program has been underway since early 2018 to identify and address a number of issues dating back to 2010,” the bank told the ASX.
“The employee entitlement issues were self-reported to the FWO and publicly disclosed from early 2019.
“In response to these issues, systems and processes have been strengthened and CBA and CommSec have not offered any new Individual Flexibility Arrangements for more than two years.”
CBA faces fines running potentially into the tens of millions of dollars if it loses the case.
The maximum penalty for “serious contraventions” of the act is $666,000 per breach.