Introduction:
On 1 February 2024, a significant legal development unfolded with the enactment of the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Closing Loopholes). The Closing Loopholes amendment to the Fair Work Act 2009 (Cth) (FWA) means that employers intentionally underpaying their employees now face stringent penalties.
Key Changes:
Prior to this amendment, only Queensland and Victoria had wage theft laws in place, imposing penalties of up to 10 years imprisonment and hefty fines. As the laws were limited to these two states, it left employers elsewhere facing civil liabilities for underpayment without the risk of criminal sanctions.
Effective from 1 January 2025, the new amendments make wage theft a criminal offense at a national level. Employers deliberately withholding payment of employee wage entitlements under the FWA will be subject to hefty penalties. The intention to underpay must be proven beyond a reasonable doubt, excluding honest mistakes or miscalculations from the scope of the legislation.
Penalties and Enforcement:
Under the amended legislation, employers engaging in wage theft may face a maximum penalty of 10 years imprisonment and fines of up to $7.8 million. Enforcement will be carried out by the Fair Work Ombudsman (FWO), with matters referred to the Commonwealth Director of Public Prosecutions (CDPP) or the Australian Federal Police (AFP) for consideration and potential prosecution.
Self-Reporting and Cooperation:
The amendments introduce ‘safe haven’ provisions, encouraging employers to self-report instances of wage theft. Employers who disclose such violations to the FWO and enter into a ‘cooperation agreement’ may avoid prosecution. However, it is essential to note that this agreement does not shield against civil proceedings, and the FWO holds discretion over whether to enable such arrangements.
Protection for Small Businesses:
Recognising the unique challenges faced by small businesses, defined as those employing 15 people or less, the legislation provides a potential safeguard. Small businesses complying with the forthcoming Voluntary Small Business Wage Compliance Code may escape criminal prosecution for wage theft. The development of this code involves collaboration between the government, employer groups, and employee representatives.
Conclusion:
The Fair Work Legislation Amendment brings about a significant shift in addressing underpayment of wages, extending criminal consequences at a national level. Employers are urged to familiarise themselves with the amended legislation, consider compliance measures, and be mindful of the potential penalties associated with intentional underpayment.
Morgan + English encourages you to seek our assistance for a comprehensive review of your business’s wage policies and procedures. Our team is well-equipped to ensure that your business remains compliant and well-prepared for these legislative changes. If you would like to take advantage of our services, please do not hesitate to contact Daniel Morgan (daniel@morganenglish.com.au) and the Workplace team today!
