FWO secures record $10.34 million penalties against Commonwealth Bank and CommSec

The Fair Work Ombudsman has secured a record $10.34 million in penalties against the Commonwealth Bank of Australia (CBA) and its subsidiary CommSec in response to the companies underpaying employees more than $16 million.

The Federal Court has imposed a $7.31 million penalty against CBA and an additional $3.03 million penalty against CommSec (formally known as Commonwealth Securities Limited).

The penalties were imposed after CBA and CommSec admitted multiple breaches of the Fair Work Act, including some ‘serious contraventions‘ committed knowingly and systematically, which attract a tenfold increase in applicable maximum penalties.

The penalties are the highest ever secured in a Fair Work Ombudsman legal action.

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.

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.

Justice Robert Bromwich found that senior staff at CBA and CommSec had been put on notice of potential non-compliance issues and “knew facts that should have sounded a warning” but took years to address non-compliance issues, and that “responsible HR managers had disregarded or been indifferent to the risk that [IFAs] were not meeting the employees’ entitlements”.

This resulted in employees’ basic lawful minimum entitlements being undercut and employees being left worse off for several years.

CBA also breached workplace laws by misrepresenting to some workers that they were better off under the IFAs.

In total, 7,402 CBA and CommSec employees were underpaid a total of $16.07 million from 2015 to 2021.

The affected staff were located in metropolitan and regional areas in every state and territory in Australia. Most worked in customer service roles.

Fair Work Ombudsman Anna Booth said it was completely unacceptable for such a large, well-resourced corporate employer to have such a poor attitude towards ensuring it paid its staff their basic lawful entitlements for the work they performed.

“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,” Ms Booth said.

Ms Booth said CBA did the right thing by self-reporting its non-compliance to the Fair Work Ombudsman, co-operating fully with the Agency’s investigation, making admissions to the contraventions and executing a widespread remediation program that involved back-paying staff at multiple companies across the CBA Group for underpayments dating back to 2010, which were beyond the statute of limitations FWO could enforce in court. The penalties were reduced to reflect that cooperation.

However, Ms Booth said the employees ultimately should have been paid correctly in the first place.

“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.

Ms Booth said many other large corporate employers in Australia still had plenty of work to do in improving their cultural attitude towards compliance.

“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,” Ms Booth said. “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.”

“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 Bromwich found that CBA and CommSec were “amply able to prevent anything of this nature occurring in the first place, let alone over such a substantial period of time”.

“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.

Justice Bromwich found that the penalties imposed should deter other companies from similar conduct, including failing to comply with workplace laws and failing to have adequate systems for ensuring compliance.

“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.”

/Public Release. View in full here.