CommBank hit with record fines after underpaying employees

Commonwealth Bank of Australia (CBA) and its subsidiary CommSec have been hit with record fines after underpaying employees millions of dollars.

The fines total $10.35 million. The Federal Court has imposed a $7.31 million penalty against CBA and $3.03 million penalty against CommSec. In total, 7,402 CBA and CommSec employees were underpaid a total of $16.07 million from 2015 to 2021.

The Fair Work Ombudsman (FWO) highlighted that the organisations' “committed knowingly and systematically, which attract a tenfold increase in applicable maximum penalties.”

“CBA and CommSec failed to put adequate checks and safeguards in place to ensure the Enterprise Agreements and Individual Flexibility Arrangements (IFAs) used for their employees were implemented in a lawful manner,” said FWO.

“This included the companies failing to implement the required system of regular reconciliations and top up payments necessary for ensuring their employees were receiving their basic lawful minimum entitlements.”

It’s reported that senior staff members at CBA and CommSec were warned about potential non-compliance issues, however they took years to address them. This caused the underpayment of employees for several years.

“Senior managers at CBA and CommSec failed to put basic safeguards in place to ensure their approach to remunerating staff did not lead to underpayments and they were far too slow to take action once clear risks of non-compliance were brought to their attention,” said Fair Work Ombudsman, Anna Booth

The company self-reported the non-compliance and is cooperating with resolving the issue, which has resulted in reduced penalties. However, Ms Booth noted that this issue should never have occurred.

“It is extremely disappointing that companies with such extensively resourced internal human resources and legal functions could have such a poor approach to ensuring they paid their staff their basic lawful entitlements,” Ms Booth said.

“For years now, the Fair Work Ombudsman has been highlighting that large corporate employers need to place a much higher priority on putting systems and processes in place to ensure they pay their employees’ full lawful entitlements. Employers cannot put in place systems that prioritise their financial or competitive advantage without also putting in place strong governance to ensure that those systems meet minimum entitlements.”

She continued: “The case highlights that having a poor corporate culture towards compliance can result in serious consequences, including facing enforcement action and suffering reputational damage.”

Justice Robert Bromwich revealed that this issue was preventable, and negligence was a key factor in the discrepancies.

“The simple fact is that the obligations were readily able to be complied with, and proper checks to ensure that was taking place were not hard to implement. That did not happen, and the message needs to be loud and clear that this is not good enough and will not be tolerated, most significantly for other would-be contraveners, but also as an ongoing warning for CBA and therefore the CBA Group of which it is the dominant member,” Justice Bromwich said.

“What needs to be deterred is a system being left in place that allows for basic errors to be made without an adequate system of checking or detection and thereby correction,” Justice Bromwich said. 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 concluded.