The Government has doubled-down on efforts to address wage underpayments.
This includes tough new ‘wage theft’ laws introduced through the ‘closing loopholes amendments’ which will mean that, from next year, intentional underpayments may lead to the criminal prosecution of an employer or officer for wage underpayments in certain circumstances.
Employers now face significantly increased maximum fines for wage underpayment contraventions.
Unions have also been provided enhanced ‘rights of entry’ to investigate suspected underpayments.
The changes mean that it is more important than ever that employers ensure that they are compliant with our minefield of workplace relations laws.
When the wage theft provisions commence on 1 January 2025 an employer may be prosecuted for underpaying employees as a criminal offence.
This may occur if an employer intentionally did something (or failed to do it) so that the required amount was not paid when it was due.
An employer may be held liable for the conduct of its employees, agents or officers.
Individual employees, agents or officers may also be individually prosecuted for related offences. For example, if they create false and misleading employee records knowing about the wage theft and to enable the employer to avoid the detection or escape punishment.
Individuals may face imprisonment of up to 10 years for contravening the new laws. Potentially crippling fines may also be imposed as well. For an individual, the maximum fine is the greater of 3 times the amount of the underpayment and $1,565,000. For a company, the fine will be the greater of three times the underpayment amount and $7,825,000.
There are ‘safe harbour’ provisions that are intended to provide some protection for employers from criminal prosecution. These include a capacity for employers to enter into ‘cooperation agreements’ with the Fair Work Ombudsman and, for small business, an ability to follow a Voluntary Small Business Wage Compliance Code which is yet to be created.
The Fair Work Ombudsman is required to consult parties including Ai Group regarding the development of its approach to the enforcement of these new provisions and Ai Group members will be kept informed of any major developments.
However, even if the safe harbour provisions apply to stop a criminal prosecution, the Fair Work Ombudsman can still pursue an employer through the civil provisions framework. For example, by issuing and enforcing a compliance notice.
A court may order that a person be fined if they contravene workplace relations laws.
For example, fines may be imposed for failing to comply with obligations under the National Employment Standards and modern awards or requirements regarding the frequency with which employees need to be paid, the keeping of employee records or the requirement to give employees correct pay slips.
Fines have increased five-fold for companies, except for small business employers. For example, the maximum penalty which can be imposed for a failure to pay an employee on time can be up to $469,500. When the wage theft provisions commence, a court may in some circumstances be able to instead impose a maximum penalty of three times the ‘underpayment amount’ if that is greater.
If it is a ‘serious contravention’, the maximum fine is ten times higher (e.g., $4,695,000). The threshold for a serious contravention may apply if an employer is aware there is a substantial risk the payment will not be made and there is no good reason to take the risk in the circumstances.
A contravention can be serious even if the employer does not know the exact amount of the underpayment.
Under the changes, a union officer can obtain an exemption certificate from the FWC to waive an otherwise applicable requirement that they provide 24 hours’ advance notice of their intention to enter an employer’s premises if they suspect a member of their organisation has been or is being underpaid.
There are many ways Ai Group can help you to prepare for and navigate the changes around the laws prohibiting wage underpayments.
Ai Group members can:
Not a member? Request a call or get in touch on 1300 55 66 77.
Ai Group & Ai Group Workplace Lawyers can also provide more detailed assistance on workplace issues, including conducting audits of payroll practices to identify any potential non-compliance. We can also help you manage compliance issues, including engaging with the Fair Work Ombudsman in relation to any compliance and enforcement activities or representing you in relevant Court or Fair Work Commission proceedings or disputes with unions.
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