Wage theft, being the intentional underpayment of wages, is now a federal criminal offence in Australia under amendments introduced into the Fair Work Act 2009 (Cth) (“Fair Work Act”) by the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 on January 1, 2025. 

The Fair Work Ombudsman (FWO) has taken back $1.5 billion in underpayments for workers in the past three years. The Super Members Council estimates unpaid superannuation costs workers $5.1 billion in 2021-22 and almost $41.6 billion over nine years.  

Further, underpayments disproportionately impact vulnerable workers, including women, young people, and migrants. The significant estimated amounts of money workers have lost due to wage non-compliance has prompted the recent large-scale employment law reform.

What is criminal wage theft? 

Employers (bodies corporate or individuals) can now be criminally liable for intentionally underpaying their workers. This includes certain employee entitlements under the Fair Work Act 2009 (Cth) or a fair work legislative instrument, such as a modern award or enterprise agreement. For certain employees, it also includes superannuation.

Scope of criminal wage theft liability

Prosecuting wage theft under the new laws will likely draw in the conduct of the board and senior managers. Directors, executives, HR managers and even third-party advisers can now be held criminally liable for intentional underpayments.

Sophie Bonnette, Senior Legal Specialist Legal Editor at Practical Law Australia, within Thomson Reuters, warns “not only can  employers (corporates or individuals) be prosecuted for wage theft under the Fair Work Act 2009 (Cth), others such as a corporate employer’s officers (including directors) can be personally prosecuted  under related offence provisions such as being an accessory.”

“A regulator will likely investigate both,” Sophie concluded.

The actions, or inaction of directors and high-level managers will be under the microscope in a wage theft claim. Employers must be able to demonstrate policies and procedures in place requiring wage compliance.

Criminal wage theft can occur in several ways: 

• Paying less than the minimum wage owed to the employee
• Failing to pay overtime rates owed to the employee
• For certain employees, not making superannuation contributions

Corporate employers found guilty of deliberately underpaying workers could face fines of up to $8.25 million (as at 28 January 2025, the federal penalty unit is $330), or triple the underpayment amount (if it can be calculated). Individual employers found guilty can face up to 10 years imprisonment and fines of up to $1.65 million, and/or triple the underpayment amount (if it can be calculated).

Intentional conduct vs unintended error

The new wage theft laws focus on intentional conduct, not inadvertent errors. Establishing intention will be critical when proving the criminal offence of wage theft, particularly where the alleged offender is a body corporate.

The criminal offence of wage theft uses the Criminal Code Act 1995 (Cth) (“Criminal Code”) when attributing criminal liability to a corporate employer. Thus, unlike other parts of the Fair Work Act, a corporate employer may be guilty of the criminal offence of underpayment if it can be proved (among other things) that:

• a corporate culture existed within it that directed, encouraged, tolerated or led to the non-compliance with the Fair Work Act or fair work instrument; or
• it failed to create and maintain a corporate culture that required compliance with the Fair Work Act or fair work instrument.

This means the FWO can examine an employer’s culture towards wage compliance in an investigation. To determine a corporate culture of compliance, or non-compliance, payroll operations will now be examined, with a corporate employer’s actions demonstrating ongoing commitment to wage compliance likely being critical to avoiding a prosecution in this space. This includes how an employer responded to wage discrepancy inquiries, and whether the overall payroll support and resourcing are satisfactory.

The occurrence of wage theft will be investigated by the FWO and, depending on its findings, then cases will be referred to the Commonwealth Director of Public Prosecutions (CDPP) or the Australian Federal Police (AFP). 

Employers at risk from a potential prosecution can disclose the matter to the FWO to seek a cooperation agreement. If an agreement is reached, the FWO will not refer them for criminal prosecution.

Increased civil penalties for unintentional underpayments

Just because an underpayment is unintentional does not mean that an employer can avoid liability under the Fair Work Act. The recent Closing Loopholes reforms did not just introduce the criminal offence of wage theft. The reforms also significantly enhanced the civil penalty regime under the Fair Work Act to address underpayments.

“While employers certainly need to be aware of, and prepared for, the criminal offence, they also need to know that substantially increased civil penalties can apply even for mistaken or unintentional underpayments,” stated Sophie.

The criminal wage theft regime operates alongside the civil penalty regime albeit noting:

• It can capture mistaken, unintentional or inadvertent underpayments
• The standard of proof is lower compared to criminal proceedings
• Civil underpayment claims can be initiated by the FWO, affected workers, or unions

Small business safe harbour provisions

Small businesses with less than 15 staff may not be referred to the CDPP or AFP if the FWO is satisfied they have complied with the Voluntary Small Business Wage Compliance Code. The Code is a legislative instrument under the Fair Work Act 2009 (Cth). The Code offers guidance on actions to achieve wage compliance.

Other than sourcing reliable information from the FWO small business employers reduce the risk of prosecution by:

• Promptly rectifying underpayments once identified
• Making reasonable efforts to determine correct pay rates
• Proactively staying updated on its obligations including pay rates

From an employee advocate’s perspective

Wage theft is a complex issue that can be difficult to identify. Lucy Bull, Assistant Principal Solicitor at Marrickville Legal Centre encourages workers to know their minimum entitlements. Wage theft can occur in many forms. Maintaining  personal records to keep track of hours worked records for up to 6 years  according to Lucy, advising its best practice to regularly review payslips.

“It’s best to look out for discrepancies between hours worked and pay received, misclassification of positions or seniority, unauthorised deductions from payslips, or failure to pay entitlements such as annual leave, sick leave, or overtime.”

“It is important employees check hourly rate of pay, classification, and entitlements either against the Fair Work Commissions’ National Employment Standards, or any applicable Modern Award, Industrial Instrument, or contract of employment,” said Lucy.

Raising enquiries about remuneration and pay is a protected workplace right under the Fair Work Act 2009 (Cth). If an employee is treated differently by their employer after raising an enquiry about pay, it’s a red flag. The employee impacted should consider seeking legal advice. 

“There are several free options available to employees that have been impacted by wage theft.” 

“Employees can consult with the Fair Work Ombudsman, Fair Work Commission, Legal Aid, or a local community legal centre such as Marrickville Legal Centre.

“An impacted employee should collate relevant documentation in relation to their employment and provide said documents when making enquiries so it can be reviewed to determine if wage theft may have occurred,” Lucy concluded.

Keeping up to date

Employers must understand and correctly apply the changes under the updated Fair Work Act 2009 (Cth) moving forward. The criminal offence of wage theft is just one of the key changes in arguably the largest suite of reforms since the enactment of the Fair Work Act 2009 (Cth).

Putting legislative reforms aside, businesses should be on top of risk management. In Transport Workers’ Union of Australia v Qantas Airways Ltd [2024] FCA 1216, the airline was found to have made hiring decisions partially motivated by the opportunity to prevent workers from enterprise bargaining and other protected actions. 

Make sure you’re on top of the key commencement dates. The Practical Law team has collated the information so you don’t have to. Download your copy of Help and information note, Closing Loopholes Acts: Key Commencement Dates.

This helpful guide outlines the commencement dates applicable to key amendments to the Fair Work Act 2009 (Cth) and other legislation contained in the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Cth) and Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2023 (Cth).

Access your copy of Closing Loopholes Acts Key Commencement Dates via the form on the top right hand side of this page.