New criminal offence for wage theft

From 1 January 2025, there is a new criminal offence of wage theft in the Fair Work Act 2009.

The offence applies to employers who intentionally engage in conduct that results in underpayment of their employees.

Unintentional underpayments cannot be prosecuted under the new wage theft laws but can still be pursued via civil (i.e. non-criminal) action.

Penalties

Employers who are found guilty of wage theft can be subject to up to 10 years’ imprisonment, and/or substantial fines.

The maximum fines are the greater of:

• $1,650,000 for an individual or $8,250,000 for body corporate (e.g. a Pty Ltd or Ltd company), and
• three times the amount of the underpayment, if the court can determine that amount.

Who investigates and prosecutes wage theft?

The Fair Work Ombudsman (FWO) will investigate allegations of wage theft and may refer matters to either the Australian Federal Police or the Commonwealth Department of Public Prosecutions for prosecution, where appropriate.

Safe Havens

The Voluntary Small Business Wage Compliance Code (the Code) is a ‘safe haven’, designed to encourage self-reporting and cooperation with the FWO, protecting employers from prosecution.

The Code is only available to small business employers, which, in broad terms, means employers with fewer than 15 employees.

If an employer can prove that they complied with the Code, the FWO cannot refer the matter for criminal prosecution or enter into a cooperation agreement (see next point) in relation to the underpayment.

The protection is against criminal prosecution only. The FWO may still take civil (i.e. non-criminal) action against the employer, including seeking monetary penalties, issuing compliance notices and requiring that underpaid employees be repaid.

Voluntary Small Business Wage Compliance Code

A small business employer will have complied with the Code if the underpayment was not intentional. In deciding whether the underpayment was intentional, the FWO will consider various factors, including:

• The efforts of the employer to ascertain correct rates of pay and other entitlements of its employees.
• The efforts of the employer to stay up to date with its obligations, including changes to awards, agreements and legislation, and changes to employees’ circumstances.
• Whether the employer has sought advice from reliable sources about its obligations.
• The steps the employer has taken to rectify underpayments.
• Whether the underpayment arose from a mistake or error in payroll processes or by a financial institution.
• Whether the underpayment arose from ambiguity or competing interpretations of obligations (such as an obligation under a modern award), and the employer applied a reasonable, but incorrect, interpretation.
• How the employer became aware of the underpayment, and where the issue was raised by a union or other employee representative, how the employer responded and how quickly the underpayment was rectified.
• Whether the underpayment was minimised because the employer acted quickly to rectify it.

Key takeaways

Stay informed

Employers should have measures in place to ensure that they are aware of:

• their current obligations to employees in relation to rates of pay and other monetary entitlements (e.g. allowances, overtime rates, shift rates, etc), and
• changes to their obligations (e.g. when award or agreement rates increase; when there is a change to the award that applies to their employees).

The FWO’s website has a range of free resources to assist employers and employees to understand and stay up to date with obligations and entitlements including subscription services which provide email alerts and updates when award entitlements change.

Act quickly and appropriately when issues arise

Employers should promptly investigate concerns about pay and other entitlements raised by employees or their representatives and rectify any underpayments as soon as possible.

Employees are entitled raise concerns about their pay and other employment conditions without being subject to adverse treatment for doing so.

Further information

https://www.fairwork.gov.au/ab...