Wage Theft a Criminal Offence: What Employers and Employees Need to Know About the New Laws

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Starting 1 January 2025, wage theft is classified as a criminal offence under new legislation introduced by the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 and the Fair Work Legislation Amendment (Closing Loopholes) Act 2024. The new legislation imposes severe penalties on employers who intentionally underpay their employees.

What is Wage Theft?

Wage theft occurs when employers fail to pay their workers the full amount owed to them, including wages, benefits, and other entitlements. Under the new laws, if an employer intentionally withholds payment or underpays employees they can be criminally charged. It’s important to note that accidental or genuine mistakes will not fall under this criminal offence.

Criminal Penalties for Intentional Underpayment

A company may face fines of up to $7.85 million, or three times the underpaid amount, whichever is higher.

An individual could face up to ten years in prison and fines of up to $1.56 million, or three times the underpaid amount, whichever is greater.

Civil Penalties

In addition to the criminal penalties, civil penalties for underpayments have also been increased. These civil penalties apply to all employers, even if the underpayment was unintentional. This adds another layer of risk for employers who fail to meet their obligations to employees.

Civil penalties for wage underpayments will increase by up to 25 times for larger companies involved in serious violations, with fines now reaching as much as $4.95 million.

What Should Employers Do?

To avoid facing penalties, employers should take immediate steps to ensure their payroll systems are fully compliant with the law. Here are some essential actions to consider:

1. Review Awards and Enterprise Agreements: Employers should double-check which awards or enterprise agreements apply to their workforce. If unsure, seeking legal advice is highly recommended to confirm any applicable award and ensure compliance;
2. Ensure Accurate Job Classifications: It’s crucial for employers to verify that job classifications across their business are correct. Incorrect classifications could lead to underpayment issues that can result in hefty penalties; and
3. Audit Payroll Processes: Employers should conduct a thorough audit of their payroll practices to ensure all employees are being paid correctly and on time, according to the applicable laws. This may involve reviewing pay rates, overtime, and any other entitlements under awards or enterprise agreements.

If you are an employee seeking advice into potential underpayment, or an employer seeking a review of your payment guidelines and processes, please contact us at Scanlan Carroll.