There is now a criminal offence for employers who intentionally underpay their employees under new wage theft laws, while the maximum civil penalties relating to underpayments have also increased.
The new offence and civil penalties are part of several changes to workplace laws introduced under the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Cth) and Fair Work Legislation Amendment (Closing Loopholes) Act 2024 (Cth) respectively.
The wage theft provisions will take effect from 1 January 2025, following the Minister for Employment and Workplace Relations' declaration of a Voluntary Small Business Wage Compliance Code on 16 December 2024.
All employers need to be satisfied they are making the correct wage payments.
Wage theft offence
Under the new laws, employers commit an offence if they:
- are required to pay an amount to an employee (such as wages), or on behalf of or for the benefit of an employee under the Fair Work Act 2009 (Cth), or an industrial instrument; and
- intentionally engage in conduct that results in a failure to pay the required amount to, on behalf of, or for the benefit of, the employee in full on or before the day when the required amount is due for payment.
Payments that are accidental, inadvertent or a genuine mistake will not be caught by the new offence.
What should employers be doing?
As a priority, employers should:
- review any awards or enterprise agreements that apply to their workforce, and if unsure, seek legal advice to confirm whether an award applies;
- ensure job classifications are correct across all roles, and
- if necessary, perform an audit of the business to confirm whether your payroll processes are compliant and correctly apply the applicable pay rules.
At a minimum, small business employers (employers with fewer than 15 employees) should comply with the Voluntary Small Business Wage Compliance Code to avoid being referred by the Fair Work Ombudsman to the Commonwealth Director of Public Prosecutions (CDPP) or the Australian Federal Police (AFP).
The Voluntary Small Business Wage Compliance Code is available on the Federal Register of Legislation's website.
Penalties for non-compliance
Criminal penalties for intentional underpayment
The maximum penalty for an individual is either 10 years' imprisonment, a fine, or both.
Fines may be substantial, with the maximum fine for a company ranging in the millions.
The Fair Work Ombudsman may enter into a cooperation agreement with employers in appropriate circumstances, which prevents the employer from being referred to the CDPP or the AFP.
Civil penalty increases
In addition to new criminal penalties, the existing civil penalties for underpayments will increase for non-small business employers. Unlike the criminal offence, these penalties apply even if the conduct is accidental.
Next steps
For advice on whether your business complies with the incoming underpayment laws, please contact Lander & Rogers' workplace relations and safety experts.
All information on this site is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific legal professional advice. No responsibility for the loss occasioned to any person acting on or refraining from action as a result of any material published can be accepted.
