Key Changes to Wage Theft and Underpayment Laws

Wage Theft Laws for Individuals and Companies

Under the new laws, intentionally underpaying employee wages and entitlements is now a criminal offence.

Employers will commit an offence if:

• They are required to pay an amount to an employee, or on behalf of, or for the benefit of an employee under the Fair Work Act or an award/enterprise agreement (including wages, penalty rates, overtime pay etc.); and

• They intentionally engage in conduct that results in their failure to pay those amounts to or for the employee in full on or before the day they’re due to be paid.

Maximum penalties for wage theft include:

• For companies, the greater of $8.25 million (25,000 penalty units) or three times the underpayment amount; and

• For individuals, up to 10 years imprisonment and/or the greater of $1.65 million (5,000 penalty units) or three times the underpayment amount.

How Small Business Can Comply with Wage Theft Laws

A small business employer (less than 15 employees) cannot be referred for criminal prosecution if the Fair Work Ombudsman is satisfied that they’ve complied with the Voluntary Small Business Wage Compliance Code (“Code”).

A small business employer will have complied with the Code if the failure to pay the applicable amount was not intentional, having regard to relevant matters set out in the Code.

Section 6(3) of the Code sets out relevant matters that may be considered in deciding whether the failure to pay the applicable amount was not intentional:

• Whether reasonable efforts were made to ascertain correct rates of pay and entitlements;

• Whether reasonable efforts were made to stay up to date with the employers’ obligations relating to the payment of applicable amounts to the employee;

• Has the employer considered and relied on information about the employee that they believed accurate (age, duties, classification…);

• Did the employer seek information or advice from reliable sources in relation to the payment;

• Has the employer taken reasonable steps to rectify the failure to pay the applicable amount after becoming aware;

• Has the employer cooperated with the Fair Work Ombudsman’s investigation after becoming aware of the failure to pay the applicable amount.

If a small business ‘self-reports’ a failure to pay amounts owed to employees, they may seek safe harbour if they have complied with the Code.

Penalties for Underpayments

The new laws also hike civil penalties for underpayments. For companies (excluding small businesses), the maximum penalty is:

• 1,500 penalty units or 15,000 for serious contraventions, or
• Three times the underpayment amount.
  

Need Help Understanding Employment Law Obligations and Risks?

For advice on navigating these changes, speak to the employment lawyers at BlueRock. Get in touch to ensure your business stays compliant and avoids the steep costs of wage theft and underpayment penalties.