Amendments to the Fair Work Act 2009 through the enactment of the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 ("the Amendments"), will become effective on 1 January 2025 resulting in criminal penalties for employers deliberately underpaying or withholding lawful employee entitlements.
What Has Changed?
The Amendments will introduce harsh new penalties for employers that satisfy a criminal burden of proof that they have intentionally acted in a way that results in underpayment to their employees. Wage theft is deliberate conduct with the intent to withhold or otherwise underpay entitlements under the Fair Work System. This includes the Fair Work Act 2009, Awards and enterprise agreements.
One-off, isolated honest mistakes or miscalculations that are remedied as soon as identified, or where it is found that there is no intention or deliberate attempt to underpay entitlements will not be categorised as wage theft. Repeated mistakes and miscalculations are more likely to be considered with reference to the circumstances as to whether they satisfy the burden of proof.
The new Voluntary Small Business Wage Compliance Code is currently in the process of development. The intention of the Code is that small businesses that have been alleged to have engaged in wage theft that can demonstrate compliance with the Code, will not be referred for criminal prosecution.
Under the Amendments, wage theft will be conduct that satisfies the burden of proof that the intent of the conduct was to underpay employee entitlements, which will be a Commonwealth criminal offence under the Amendments. This means that an employer that is proven beyond a reasonable doubt to have intentionally underpaid or withheld employment entitlements, will be guilty of a criminal offence under Commonwealth laws.
Employers who have potentially engaged in wage theft will also be encouraged to self-disclose to the Fair Work Ombudsman, with self-reporting employers afforded protections under 'self-haven' provisions. At the discretion of the Fair Work Ombudsman, an employer that self-reports under these provisions may be allowed to enter into a 'co-operation agreement' with the effect being that the conduct will not be referred for criminal prosecution but will not protect the employer from civil proceedings.
The Amendments will give the Fair Work Ombudsman the authority and responsibility to investigate new criminal offences and refer their investigations to the Commonwealth Department of Public Prosecutions or the Australian Federal Police for consideration and prosecution where appropriate.
What are the penalties under the new laws?
Penalties for wage theft will include a maximum penalty of 10 years imprisonment and fines of up to $7.8 million for employers – including individual directs that deliberately and unlawfully withhold payment of employee wage entitlements pursuant to their entitlements under the Fair Work System.
Until the Amendments become effective, wage theft laws incurring penalties to employers who are guilty of engaging in wage theft, are only applicable in Queensland and Victoria where the penalties for wage theft include imprisonment of up to 10 years, plus fines of up to $1 million in Victoria. Penalties for employers outside of Queensland and Victoria are currently civil penalties such as court-ordered fines or compensation. The enactment of the Amendments will also result in increased civil penalties for intentional underpayment of wages.
The intended effect of the Amendments is a uniform approach to the investigation and enforcement of employee entitlements across Australia, with the imposition of harsh criminal penalties acting to deter and punish businesses failing to comply with their obligations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
