Jail time for deliberate wage theft from 1 January 2025

October 13, 2024

Key points

New statutory provisions prohibiting deliberate underpayment of wages to employees in Australia will commence on 1 January 2025. The new laws include maximum prison sentences of up to 10 years for corporate executives involved in the offences.

Background

Amendments made to Australia's national workplace legislation, the Fair Work Act 2009 (Cth), introduced by the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Cth), will usher in a new era of strict wage compliance and criminal liability from 1 January 2025.

Under the new laws, corporate senior executives who are involved in intentionally underpaying employees under applicable modern awards or enterprise agreements (including superannuation) could face up to 10 years in prison. These prison sentences match the maximum sentences for many serious crimes under criminal laws but have never before applied to workplace conduct.

Determination of guilt

Guilt will be established under the new laws where a person, which could include a CEO, Payroll Manager or Finance Manager, intentionally causes underpayments or is aware that they will occur in the normal course. The Fair Work Ombudsman will be able to refer suspected cases to the Commonwealth Director of Public Prosecutions or the Australian Federal Police for criminal investigation. Standard criminal sentencing principles apply to culpability.

Increased fines

Fines for deliberate wage theft have also increased. In the event that a prison sentence is not imposed, courts can impose a maximum fine of 25,000 penalty units (equivalent to AU$7.8 million) for wage theft convictions.

Safe harbours for employers

The new laws introduce some "safe harbour" protections for employers. Small businesses will be able to adhere to a "voluntary small business wage compliance code", which if followed, may act as a defence to a prosecution. Larger employers have the option of self-reporting suspected wage theft to the Fair Work Ombudsman and can enter into a "cooperation agreement." However, it's essential to note that these safe harbours do not shield employers from civil recovery and penalty actions by the Fair Work Ombudsman.

Proactive compliance

In the lead up to the commencement of the new laws on 1 January 2025, employers are advised to brief boards on the importance of wage compliance and to conduct audits (under legal privilege) to determine resolve any anomalies relating to:

• the payment of minimum wages under modern awards or enterprise agreement;
• the correct classification of employees and accurate position descriptions;
• the correct application of modern awards within the organisation; and
• the payment of superannuation guarantee contributions.

Prompt legal advice should be sought about identified underpayments and rectification steps taken.