New Wage Theft Laws – The New Fair Work Act Changes Target Underpayment with Stricter Penalties

Introduction

As part of the new changes to workplace laws under the Fair Work Legislation Amendment (Closing Loopholes) Act 2023, Australia has introduced new and harsher underpayment and wage theft laws. These changes are designed to tackle the widespread issue of workers being underpaid and exploited in the workplace.

Both employers and employees need to be aware of these changes.

This article will explore the relevant changes and harsher penalties.

Criminalising Intentional Wage Underpayments

One of the major changes being introduced is that the intentional underpayment of wages by employers will now constitute a criminal offence.

Prior to these changes being enacted on 1 January 2025, only Queensland and Victoria have criminalised wage theft. In Queensland, employers who engage in deliberate wage theft may face up to 10 years imprisonment. Meanwhile in Victoria, employers who dishonestly withhold employee entitlements face a penalty of up to $1 million and up to 10 years’ imprisonment.

In other states, employers simply face civil penalties for failing to pay employee entitlements including paying the entitlements owed and/or the imposition of a fine.

This new amendment will make wage theft a criminal offence across Australia. Under these new provisions, it must be shown that the employer intentionally underpaid employees to the criminal standard of proof, being beyond a reasonable doubt.

These new provisions will only be applicable to intentional underpayments that occur after the provisions come into effect on 1 January 2025. This also includes when the underpayments occur as part of a course of conduct that commenced prior to the provisions taking effect.

Exceptions to New Provisions

These new provisions are not applicable for underpayments for superannuation contributions, long service leave, taking leave connected with being the victim of a crime and payment for taking jury duty leave or for emergency services duties.

Importantly for employers, these penalties for underpayment will not be imposed for one-off, isolated, honest mistakes or miscalculations that are remedied once they are identified. However, it must be noted that repeated mistakes and miscalculations may be cause for concern and may result in penalties being applicable.

Voluntary Small Business Wage Compliance Code

Small businesses, being businesses with 15 employees or less, will not be referred for criminal prosecution for intentional wage theft.

However, in order for a small business to not be referred for criminal prosecution, they must show compliance with the new Voluntary Small Business Wage Compliance Code that will be established.

This code is currently being developed.

Penalties

Penalties for this new criminal offence is as follows:

For a Company:

• If a court can determine the underpayment, the greater of 3 times the amount of the underpayment and $7.825 million; or
• If the court cannot determine the underpayment, $7.825 million.

For an Individual:

• Maximum of 10 years in prison;
• If the court can determine the underpayment, the greater of 3 times the amount of the underpayment and $1.565 million; or
• If the court cannot determine the underpayment, $1.565 million.

The Fair Work Ombudsman is responsible for investigating suspected underpayment offences.

Increased Civil Penalties

In addition to the introduction of underpayment constituting a criminal offence, the new provisions have also led to an increase in civil penalties for wage underpayments.

These new provisions increase the maximum penalty for underpayment for non-small business employers.

The changes now mean that the maximum civil penalty is the greater of 3 times the value of the underpayment and the relevant penalty unit amount for the contravention.

These changes will also come into effect on 1 January 2025.

It is more important than ever as an employer to ensure that you are paying your employees correctly. As an employee, you should also be conscious of what your employer is paying you and if you have any concerns, you should contact the Fair Work Ombudsman.

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