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The Federal Court has imposed $10.34 million in penalties against the Commonwealth Bank of Australia (CBA) and its subsidiary CommSec in response to the companies underpaying employees.

The Commonwealth Bank of Australia (CBA) was fined $7.31 million and its subsidiary CommSec (formally known as Commonwealth Securities Limited) fined $3.03 million.

The penalties were imposed after CBA and CommSec admitted to 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.

The Federal Court 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.

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