Criminal wage theft commences 1 January 2025

At a glance

• From 1 January 2025, employers who intentionally underpay employees will commit a criminal offence.
• Criminal penalties of up to AUD7.825,000 for corporations, or up to 10 years imprisonment or AUD1,565,000 for individuals, will apply.

What is the offence? 

A new offence which criminalises wage theft has been introduced in the Fair Work Act 2009 (FWA).

Employers commit criminal wage theft where they intentionally engage in conduct that results in them failing to provide employees with any payments in full, and by the date required to be paid under the FWA or a modern award or enterprise agreement.

Payments that are caught include wages; superannuation contributions; redundancy pay; leave payments; overtime; penalty rates; allowances; and leave loading. The offence does not cover payments that are solely contractual entitlements (eg bonuses and incentive arrangements). 

The offence applies to intentional underpayments occurring from 1 January 2025 onwards, but also extends to conduct before this date where it forms part of a course of conduct. 

Employers can self-report potential wage theft to the Fair Work Ombudsman (the national labour enforcement body) by entering into a cooperation agreement with it. In these circumstances, the Ombudsman may agree not to refer the conduct for prosecution.   

However, this does not limit or prevent the Ombudsman from issuing compliance notices requiring workers to be repaid, or the employees, or relevant labour unions, from seeking civil penalties or repayment of amounts owed.

What is the amount of the penalties?

For employers:

• if the court can determine the amount of underpayment, the greater of three times the amount of the underpayment and AUD7,825,000, or otherwise a penalty of up to AUD7,825,000.

For individuals involved in the offence:

• a maximum of ten years' imprisonment or, if the court can determine the underpayment, the greater of three times the underpayment amount and AUD1,565,000, or otherwise, a fine of up to AUD1,565,000.
   

What should employers do? 

Given the significant penalties, before 1 January 2025 employers should:

• review or test payroll systems and employee payments to be satisfied of compliance. In particular, for employees who are covered by modern awards and enterprise agreements, employers should test for correct classification; and
• educate managers and executive staff on the offence and the importance of raising any potential underpayment issues.