Wage Theft Could Land You Behind Bars

December 20, 2023

The Fair Work Legislation Amendment (Closing Loopholes) Act 2023 amending the Fair Work Act 2009 has come with a range of changes, many of which create additional risks for Australian employers. Of note is the criminalisation of intentional wage theft and non-payment of superannuation. These changes will commence prospectively on January 1, 2025. However, employers need to act now to ensure they don’t fall victim to accusations of wage theft once the law kicks in.

What is wage theft?

Wage theft is defined to be both the underpayment and non-payment of wages. This extends to any range of activities that withhold any worker’s legal entitlements, regardless of intention. The new law also establishes the new concept of criminal wage theft.

What constitutes criminal wage theft?

The new section 327A of the Fair Work Act define the elements necessary to prove criminal wage theft. An employer commits an offence where:

  • an employer is required to pay a required amount to, on behalf of, or for the benefit of the relevant employee under a Fair Work instrument (e.g., an enterprise agreement or modern award). NOTE: This does not include an employment contract; AND
  • the required amount is not one payable to a superannuation fund, long service leave (under state and territory legislation), leave for the victims of crime, paid jury service, or other emergency service leave e.g. wages; AND
  • the employer participates in conduct; AND
  • this conduct causes the failure to pay the required amount to, on behalf of, or for the benefit of the relevant employee in full prior to or on the day of which the amount is due. 

NOTE: The law also provides further fault elements that are required to be proven beyond reasonable doubt drawing on standards of proof from the Criminal Code such as absolute liability and intention.

What are the penalties?

The new law provides that wage theft is punishable for corporations by a fine, while individuals may face up to 10 years imprisonment along with fines.

The law also provides that the maximum amount of the fine is dependent on whether the Court is able to identify (calculate) the underpayment amount.

Maximum penalties that may be imposed by the Court are:

  • 3 times the underpayment amount; or
  • for an individual, 5000 penalty points (equivalent – $1,565,000) 
  • for a corporation, 25000 penalty points (equivalent – $7,825,000)

NOTE: where the underpayment amount cannot be identified the default amount is 5000 penalty points for an individual or 25000 for a corporation. 

What are your next steps?

  • Conduct an internal review to ensure that all employment contracts are up to date and compliant with the NES and relevant award or agreement. 
  • Maintain all employee records and payslips in accordance with the Fair Work Act for 7 years. This includes the documentation of the rate of remuneration, paid loadings, penalty rates and overtime rates.
  • Ensure you are meeting the obligations in relation to employee payslips , as employee records and payslips may be used as evidence in wage theft matters.
  • Comply with the voluntary small business wage compliance code (this will be available shortly)

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