Employment, Discrimination and Equality Law 31 January 2025

Are you up to date with the new wage theft laws?

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As the summer sun sets on January of the new year, it prompts a timely reminder that Australia’s new wage theft laws have been in place for a month now. We have put together the below overview about what the laws mean for your business.

On 1 January 2025 new wage theft laws came into play providing that if an employer intentionally underpays an employee they can be subject to criminal prosecution.

The Fair Work Ombudsman (FWO) will be responsible for investigating potential wage theft and then deciding whether to refer a matter to the Commonwealth Director of Public Prosecutions (CDPP) or the Australian Federal Police (AFP) for prosecution.

The new offence is not intended to capture employers who inadvertently or mistakenly underpay staff.

Underpayments may include:

  1. not paying sufficient wages, including penalty rates, overtime rates and allowances (or not paying them at all)
  2. not paying amounts required by the applicable award or enterprise agreement
  3. not paying other entitlements, for example, superannuation for some employees

Businesses will fall foul of the new criminal offence if:

  1. they are required to pay an amount to an employee (such as wages or super); and
  2. they intentionally engaged in conduct that results in a failure to pay the required amount to the employee in full on or before the day when the outstanding amount is due.

What is intentional conduct?

Intentional conduct includes:

  1. taking action, such as purposely paying less than an employee’s minimum entitlements; or
  2. failing to take an action, like purposely not paying an employee at all.

For individuals, the wage theft offence will carry a maximum penalty of 10 years’ imprisonment, and/or a maximum fine of the greater of:

  1. 3 times the amount of the underpayment, if the court can determine that amount; or
  2. $1,565,000 (5,000 penalty units).

For companies, the maximum penalty is the greater of three times the underpayment amount, if the court can determine the amount of the underpayment, or $7,825,000 (25,000 penalty units).

It’s not just the business owners who can be prosecuted for criminal underpayments. Other people involved in an underpayment can also be held criminally responsible. This can include, for example, payroll managers, managers or accountants in the business where their conduct contributed to an intentional underpayment.

When does the FWO refer conduct for criminal prosecution?

In determining whether to refer conduct to the CDPP or AFP, the FWO will consider certain public interest factors, such as the nature, seriousness and circumstances of the alleged contravention and the impact of the alleged contravention.

Referrals will generally be reserved for the most serious conduct, including where there is a greater need for specific or general deterrence than civil litigation. Unlike civil litigation, the FWO will not refer a matter for prosecution solely for the purpose of clarifying the law (e.g. the interpretation of an entitlement in a fair work instrument).

The FWO recognises that not all conduct potentially amounting to a criminal underpayment offence, or a related offence must result in a referral for prosecution. The FWO will consider entering into a cooperation agreement with a person that has reported conduct, and positively engaged with them, and agrees to enable the remedying of the effects of their conduct.

Some relief for small businesses – Voluntary Small Business Wage Compliance Code

The Voluntary Small Business Wage Compliance Code (the ‘Code’) is a legislative instrument declared by the Minister under the FW Act. Its purpose is to give small business employers (less than 15 employees) comfort that the FWO will not refer them for possible criminal prosecution if they did not intentionally underpay their employees.

If the FWO is satisfied that the small business employer has complied with the Code they can’t refer a small business employer’s conduct for possible criminal prosecution.

The Code isn’t a checklist. This means that a small business employer doesn’t need to show they meet all the factors prescribed in the code. There is also not one factor that must be met to have complied with the Code. Instead, where an underpayment has occurred, the FWO will conduct a holistic assessment, considering the business’ particular circumstances to determine whether the Code has been satisfied.

The FWO has provided the following table as an example of how to apply the factors in code:[1]

Are there any exceptions?

There are limited circumstances where the criminal offence won’t apply to particular entitlements. The exceptions broadly apply to employees in Victoria who are employed by sole traders, partnerships, other unincorporated entities, or non-trading corporations and most Victorian state government employees.

The criminal offence may not apply to these employees for the following specific types of underpayments:

  1. superannuation contributions
  2. payment for taking long service leave
  3. payment for taking leave connected with being the victim of a crime; and
  4. payment for taking jury duty leave or for emergency services duties.

Key Takeaways

Workforce Planning: It is essential to correctly identify an employee’s role, duties, hours and patterns of work from the outset to help properly determine relevant award or enterprise agreement classifications and associated entitlements. Ensuring this is correct from the start of the employment relationship and implementing a system to regularly monitor this as the relationship evolves over time, will help prevent non-compliance.

Payroll Training & Audits: Thorough training for payroll operators and business leaders, along with implanting a payroll compliance plan is recommended. While payroll software can be helpful, relying solely on automation without proper oversight may create risk. Consistent monitoring of payroll systems and fostering a culture of compliance and accountability should help ensure payroll accuracy and avoid underpayment issues. If discrepancies arise, businesses should seek legal advice and address issues swiftly.

Compliance is Key: Even if the criminal provisions don’t apply, preexisting civil penalties remain applicable to wage compliance matters. Non-compliance with civil penalty provisions under the Fair Work Act remains a serious issue for all businesses, and businesses should maintain proactive efforts to avoid non-compliance such as reviewing awards and enterprise agreements that apply, reviewing and updating employment contracts for new and existing employees.

[1] Fair Work Ombudsman, ‘Voluntary Small Business Wage Compliance Code’, (Voluntary Small Business Wage Compliance Code – Fair Work Ombudsman).

Alexandra Gronow.
Alexandra Gronow Special Counsel Employment, Discrimination & Equality Law View profile
Kate Rowland.
Kate Rowland Lawyer Employment, Discrimination & Equality Law View profile
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