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Criminalisation of Wage Theft – What Do You Need To Know?

More changes to the Fair Work Act 2009 (Cth) are on the horizon, with harsh penalties for employers that intentionally underpay employees (wage theft) coming into effect on 1 January 2025.

What is the law at the moment?

Before the Federal update, Queensland and Victoria were the only Australian states to have enacted wage theft laws.

In Queensland, employers engaging in deliberate wage theft risk u to 10 years’ imprisonment. In Victoria, employers dishonestly withholding employee entitlements face a potential penalty of up to $1 million and up to 10 years’ imprisonment.

Across the rest of Australia, an employer could face civil liability for failing to pay an employee their entitlements under the Fair Work Act, an enterprise agreement or a modern award. While this could result in the court awarding compensation and a civil penalty, there was no risk of criminal sanction.

What’s changing?

The Fair Work Legislation Amendment (Closing Loopholes) Act 2023 will amend the Fair Work Act to make wage theft a criminal offence at a Commonwealth level. These amendments will apply to employers who intentionally engage in conduct that results in an underpayment to employees.

The new laws apply to entitlements under the Fair Work Act, modern awards, or enterprise agreements, not contractual arrangements or entitlements like jury duty payments or long service leave.

What is underpayment?

Underpayment refers to receiving less pay than what you are entitled to. This can occur in various work settings, meaning you might earn less than what is specified in the relevant Award or agreement, or below the national minimum wage. When underpayment is intentional, it is referred to as wage theft.

Underpayment and wage theft can take many forms, including:

  • Failing to pay superannuation
  • Failing to pay breaks and overtime
  • Not paying for trial or training periods
  • Not paying personal, annual or other forms of paid leave entitlements
  • Misclassifying workers as independent contractors
  • Not paying personal, annual or paid leave
  • Not paying you the right rate according to your award classification.

What will the penalties be?

Under the new amendments, employers found guilty of wage theft face severe penalties, including up to 10 years’ imprisonment for individuals and fines of up to $7.8 million for companies.

The penalties will be calculated based on the greater of:

  • 3x the amount underpaid (if calculable),
  • $7.8 million for companies, or
  • $1.57 million for individuals.

These penalties are intended to reflect the seriousness of intentional wage underpayment and aim to deter employers from engaging in dishonest conduct regarding employee entitlements.

The Fair Work Ombudsman (FWO) will investigate wage theft allegations and refer cases to the Commonwealth Director of Public Prosecutions (CDPP) or the Australian Federal Police (AFP) for criminal prosecution.

But what if it’s an honest accident?

Intent is key. To be criminally liable, the employer’s intent to withhold wages must be proven beyond a reasonable doubt. Honest mistakes or payroll errors are not considered criminal.

Small businesses that can show compliance with the upcoming (currently in development) Voluntary Small Business Wage Compliance Code will not be referred for criminal prosecution.

What does all this mean?

For employers, the new laws signal a shift towards stricter accountability for wage compliance, with intentional underpayment now treated as a serious criminal offence at the national level.

The penalties underscore the importance of robust payroll systems, a clear understanding of award entitlements, and accurate record-keeping.

Employers must take proactive steps to ensure they are meeting their obligations under the Fair Work Act, as the risk of significant fines, imprisonment, and reputational damage has never been higher.

While honest errors will not lead to criminal charges, failing to address potential underpayment issues could still result in civil penalties or prosecutions. This legislative change serves as a reminder that ignorance of the law is no excuse, and compliance must be a priority for all businesses, regardless of size or industry.

The introduction of criminal penalties raises the stakes for agribusinesses, particularly those managing casual, seasonal, or award-based workers, who may be at greater risk of underpayment disputes. Agribusiness employers should proactively ensure compliance to avoid severe penalties and reputational damage.

Sources: Employment Law Handbook, Fair Work Ombudsman, Department of Employment and Workplace Relations

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