November 16, 2022
Federal wage theft laws could soon be here: here’s what they’ll mean for you
The Albanese government has pledged to criminalise wage theft. We explore what it means for you and your business.
Why wage theft is an issue
A PWC study found that Australians were underpaid $1.35 billion a year due to wage theft. The report also found the practice was especially rife in industries such as construction, healthcare and social assistance, hospitality and retail.
There have been several recent high-profile cases involving actual or alleged wage theft that have involved companies as large as Wesfarmers and Woolworths – which shows just how widespread the problem could potentially be.
The government says wage theft should be high on the agenda because it disproportionately affects vulnerable workers, including women, young people and migrants. It also says that wage theft is so rife that some employers have even built it into their business models.
To combat this, it will attempt to change the Fair Work Act to penalise employers and individuals who actively engage in wage theft. The government has also indicated that this is likely to include the possibility of imprisonment in extreme circumstances.
Existing wage theft laws
Section 539 of the Fair Work Act 2009 makes it a civil offence to knowingly underpay employees, punishable by up to $133,200 for individuals in the case of serious offences. But the government’s proposed new laws propose to go further.
In doing so, they are likely to be more similar to some state-based wage theft laws, including those of Victoria, Queensland and Western Australia. The Victorian laws, which came into effect in early 2021, make it a crime for employers to:
- deliberately and dishonestly underpay employees
- deliberately and dishonestly withhold wages, superannuation or other employee entitlements
- falsify employee entitlement records to gain a financial advantage, and
- avoid keeping employee entitlement records to gain a financial advantage.
The penalties for individuals who commit these offences in Victoria can be a fine of up to $218,088 and up to 10 years imprisonment; for companies, it can be a fine of up to $1,090,044. We should expect the same to happen federally.
Staying on top of underpayment
While the new wage theft laws will be aimed at those who deliberately engage in wage theft, you can still be penalised for inadvertently underpaying your staff – and may face the prospect of having to make significant backpay.
For that reason, you should always stay on top of your minimum payment obligations, which tend to take the following hierarchy:
- National Minimum Wage Order. This is set by the Fair Work Commission and s the absolute minimum amount Australian workers can be paid.
- Modern Awards. These set minimum wages for people performing work in different industries and apply on top of the National Minimum Wage.
- Enterprise Agreements. These bind specific employers or groups of employers and their employees.
- Employment contracts. These set the conditions between an employer and just one employee.
Some employers may face the prospect of having multiple instruments or agreements specifying different rates. In this instance, it pays to remember that individual contracts can’t usually provide rates lower than those that would otherwise apply.
Australia’s wage laws can be complex, but it’s vital you’re across them. It’s also obviously important, both ethically and legally, that you never wilfully underpay staff.
If you‘d like to know more about your obligations, get in touch.