The Commonwealth Bank of Australia (ASX: CBA) share price is in focus after the big four ASX bank share was accused of underpaying thousands of staff.
According to reporting by the Australian Financial Review, the bank knowingly underpaid staff members more than $16 million through mass use of individual agreements that “unlawfully undercut union agreements”.
What’s the problem?
Aside from the fact that the bank seemingly underpaid millions of dollars with these staff members, there’s also the possibility that of exposure to “massive fines” to use the AFR‘s wording.
CBA has accepted these allegations in the Federal Court that its senior managers were “repeatedly on notice that workers were getting underpaid since 2010 but failed to fix the issue and even misled staff and the workplace umpire that it was complying with the law in what it conceded was a decade of ‘systematic conduct'”.
But, it was reported that CBA had paid back these wages, with interest.
However, the problem for CBA is that each breach of the Fair Work Act could mean a fine of up to $660,000 per breach for serious contraventions of workplace laws. Don’t forget, CBA has admitted to “knowingly or recklessly” underpaying the workers.
A big fine would probably hurt the CBA share price as it would reduce earnings.
The AFR then reported:
According to a statement of agreed facts filed in court last month, CBA was put on notice about the underpayment risk at multiple points over several years but did not change its practices until December 2018 at the earliest.
The Fair Work Ombudsman has alleged that CBA has been doing this since 2010, failing to ensure staff on individual flexibility arrangements were paid more than the enterprise agreement and failed to make top-up payments to fix shortfalls, even though it said it would.
The AFR then reported that bank did not install processes for regular pay reconciliations and top-up payments, and would only apply the ‘better off overall test’ (BOOT) clause if a worker complained.
Throughout the period examined, CBA told employees and the Fair Work Commission that it was “doing what was required by the agreement’s BOOT clause.”
Final thoughts on the CBA share price
The big banks got a real hammering during the Hayne Royal Commission
a few years ago, so it’s disappointing to hear that it hasn’t done the right thing with its own employees.
Are there any other gremlins within the bank that are going to be uncovered in future years? Hopefully not.
But, there are other ASX dividend shares that I’d rather own which could deliver more growth.
