The federal Fair Work Ombudsman already regulates the same terrain but without the threat of prison time.
The Morrison government is developing its own laws criminalising wage theft through a working group under Attorney-General Christian Porter and has signalled Victoria's laws might be open to a constitutional challenge.
"It is totally unnecessary for the Andrews government to rush into this ill-conceived venture,"Mr Porter said.
Victorian employers wanting to self-report staff underpayments would now probably have to deal with both state and federal agencies,University of Melbourne labour law expert Professor John Howe said.
Melissa Kennedy,a PhD scholar working under Professor Howe,said there was a risk business owners would be less likely to come forward once the Victorian scheme was in effect because they faced being prosecuted at both a state and federal level.
She said the Fair Work Ombudsman tended to prioritise the repayment of workers,reducing penalties for business owners who self-reported errors and co-operated with investigations.
"Whereas with the Victorian scheme,it prioritises the punishment angle rather than repayments,"Ms Kennedy said. Research showed the number of claims pursued by authorities tended to be a stronger deterrent than the severity of punishments,she said.
Peter Strong,chief executive of the Council of Small Business Organisations of Australia lobby group,said there was a"real risk"of people being prosecuted multiple times.
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Mr Strong said criminalising only the most egregious cases of wage theft at a federal level was a more sensible approach."The people who do true wage theft,go get them,they're giving us all a bad name and they're wrong,"he said.
In recent years some of Australia’s largest companies have been embroiled in major scandals over the underpayment of workers.
Investigations byThe Age have exposed underpayments at dozens of businesses,including at 7-Eleven,McDonald’s,Coles,at large franchises,high-profile restaurants and on farms. Fair Work Ombudsman surveys have shown about half of all hospitality businesses are non-compliant with labour laws.
Professional services firm PwC has estimated 13 per cent of Australian workers are underpaid a total of $1.35 billion a year.
The new Victorian Wage Inspectorate will have strong powers,including rights to enter premises to obtain information and seize evidence and to apply for and execute search warrants. The inspectorate will also target employers who falsify wage records,or dishonestly fail to keep records in a bid to hide wage underpayments.
Ms Hennessy paid tribute to campaigners,including Young Workers Centre director Felicity Sowerbutts,for their role in highlighting the impact of wage theft.
"The existing legal regime has failed to prevent the exploitation of Victorian workers by unscrupulous employers,"Ms Hennessy said.
The Victorian inspectorate will be allowed to co-ordinate with its federal counterpart but no formal arrangement has been established.
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