New criminal wage theft laws commenced on 1 January 2025
Employers should be aware that as of 1 January 2025, new laws have commenced which introduce criminal offences for employers who intentionally underpay their employees’ entitlements.
The Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Cth), which inserts new section 327A(1) into the Fair Work Act 2009 (Cth) (FW Act), now introduces a criminal offence for employers who intentionally engage in conduct which results in their employees being underpaid. Importantly, these laws do not capture an employer’s inadvertent errors which result in an underpayment.
The offence applies not only to the underpayment of wages but also to the underpayment of other entitlements arising from the FW Act or an applicable enterprise agreement or Modern Award.
For employers, contraventions may attract a maximum penalty of $7.8 million or three times the underpayment amount (whichever is greater). For individuals, contraventions may attract a maximum penalty of up to ten years imprisonment, $1.56 million or three times the underpayment amount (whichever is greater).
The Fair Work Ombudsman will be responsible for investigating underpayments in the first instance. The Fair Work Ombudsman may then elect to refer an underpayment to the Director of Public Prosecutions or the Australian Federal Police for prosecution.
Employers may only be prosecuted for offences which occur after 1 January 2025. Employers cannot be prosecuted for underpayments which occurred prior to this date. Proceedings must be commenced within six years after an offence has been committed.
The new laws also introduce some ‘safe harbour’ provisions for employers. Small business employers can follow a ‘voluntary small business wage compliance code’, which may act as a defence to prosecution, if followed. Non-small business employers may self-report underpayments to the Fair Work Ombudsman, which can result in a ‘cooperation agreement’ being entered between the employer and the Fair Work Ombudsman, in lieu of a prosecution. The Fair Work Ombudsman has sole discretion as to whether any such agreements are entered.
Even though the criminal offence of wage theft relates only to intentional underpayments, employers should be aware that unintentional underpayments can still attract penalties under the FW Act. This is an opportune time to assess your pay practices and ensure your compliance with the relevant legislation and industrial instruments.
Should you wish to discuss any material contained in this alert, please contact Sathish Dasan on +61 8 8210 1253 or SDasan@normans.com.au, Annabelle Narayan on +61 8 8210 1292 or ANarayan@normans.com.au, or Christian Beltrame on +61 8 8210 1234 or CBeltrame@normans.com.au.
