From 1 January 2025, new amendments to the Fair Work Act will impose a penalty of up to 10 years’ imprisonment and fines of up to $7.8 million for employers (and their directors) that deliberately withhold payment of employee wage entitlements under the Fair Work Act.
What are the new changes?
Queensland and Victoria currently are the only Australian states that have wage theft laws. Under existing provisions in other states employers that fail to pay an employee their entitlements under the Fair Work Act, an enterprise agreement or a modern award can be ordered by a court to pay compensation for the amount owing and/or to pay a fine. They cannot be criminally sanctioned, though.
The new amendments will make wage theft a criminal offence at a Commonwealth level (and therefore in all states) and will apply to employers who intentionally engage in conduct that results in an underpayment to employees.
The intention of an employer must be proven beyond reasonable doubt. Honest mistakes or miscalculations will not be captured by the new laws.
The laws will carry a maximum penalty of 10 years’ imprisonment and/or a maximum fine of the greater of:
- three times the amount of the underpayment, if the court can determine that amount; or
- for an individual, 5,000 penalty units ($1,565,000); or
- for a body corporate, 25,000 penalty units ($7,825,000).
The offence will apply to payments that are employee entitlements under the Fair Work Act, a modern award or an enterprise agreement. They will not apply to contractual entitlements, payments for jury duty or payments for long service leave.
How will it work in practice?
The Fair Work Ombudsman will be responsible for investigating wage theft. It will, where appropriate, refer matters to the Commonwealth Director of Public Prosecutions or the Australian Federal Police for consideration and prosecution.
The new amendments include ‘safe haven’ provisions that allow an employer to self-disclose possible wage theft to the FWO and enter into a ‘cooperation agreement’. The FWO will have complete discretion about whether it will enter into a cooperation agreement, but if it does then the FWO will not refer the employer’s conduct for prosecution. A cooperation agreement will not protect an employer against civil claims.
The new laws will also include a ‘Voluntary Small Business Wage Compliance Code’. The Code currently being developed by the government in partnership with employer and employee groups. Compliance with the Code will prevent the FWO from referring employers for prosecution.
