Intentional or not, wage theft is a serious offense that can come with heavy penalties. Here’s what you need to know.

While proposed wage theft reforms did not make it into the Federal Governments industrial relations bill passed last month, it would be impossible to argue that wage theft is not an ongoing issue in Australia.

Analysis from PwC released in 2019 estimated worker underpayments to be as high as $1.35 billion per year and a glance of recent news shows that it is a problem that persists across a wide range of industries and professions. Of course, wage theft is not always caused by deliberately fraudulent behaviour. In some cases, it results from a lack of due diligence by a business, its employees, and advisors.

Either way, there can be heavy penalties for wage theft and these extend beyond obvious reputational damage to significant fines and potential jail time. The Fair Work Ombudsman (FWO) can inflict its own penalties and, as of last year, both the Victorian and Queensland state governments passed legislation which made wage theft a criminal offense.

Definition and penalties of wage theft

The definitions and penalties associated with wage theft differ between states and the FWO and it is important that you and your clients are aware of the risks and repercussions. Following is a snapshot of what you need to know about wage theft so you can be part of the solution and protect yourself, your employer or clients, and most importantly employees.

Fair Work

Employers and individuals can face on the spot infringement notices or be taken to court where the FWO reasonably believes that they have contravened the record-keeping and pay slip obligations contained in the Fair Work Act 2009 and the Fair Work Regulations 2009.

Higher penalties apply for serious contraventions where a business or individual knew that they were contravening workplace law and they did so as part of a systematic pattern of conduct. These penalties can apply to breaches of modern awards or enterprise agreements, a national minimum wage order, the method and frequency of paying wages, record-keeping, and payslip requirements, and more

It should also be known that if a corporate employer is found to have breached a relevant provision of the Fair Work Act, then a manager involved in the contravention could also be personally liable and face a civil penalty of up to $12,600 per contravention.

Victoria

Introduced last year, the Victorian Wage Theft Act 2020 will make wage theft a criminal offense when it comes into effect which will be no later than 1 July 2021. Those who commit offense could face fines of up to $198,264 for individuals, $991,320 for companies and up to ten years’ imprisonment.

Specifically, the legislation creates the following offences:

  • Dishonestly withholding employee wages, leave entitlements, or superannuation
  • Falsifying or failing to keep employee’s records, such as payroll records

The new laws differ from the underpayment provisions in the Fair Work Act in that they would require dishonest intent for employers to be found guilty. Those who make honest mistakes or perform due diligence will not be found guilty under these laws, but they could still face penalties or prosecution by the FWO.

Queensland

Queensland has also made wage theft a criminal offence. In September 2020, the state passed the Criminal Code and Other Legislation (Wage Theft) Amendment Act 2020. This act amends the Queensland Criminal Code definition of stealing to provide an offence against an employer who intentionally fails to make payment of wages or entitlements, when it becomes payable to their employees.

The drafting of the new offence is written in broad terms to catch a variety of deliberate unlawful conduct, including:

  • Unpaid hours or underpayment of hours of work
  • Unpaid penalty rates
  • Unpaid superannuation contributions
  • Unreasonable wage deductions
  • Avoidance of payments due to “sham contracting” or intentionally classifying an employee under the wrong award

Employers found to have committed an offence can be liable to up to ten years’ imprisonment.

How to prevent unintentional wage theft

Continued incidents of wage underpayment indicate that industrial law advice and payroll audit compliance is not prioritised by many employers or that they lack the appropriate resources and expertise to exercise proper due diligence.

However, legislators have made it clear that employers must take all reasonably practicable steps to comply with their obligations. These include seeking industrial law advice, conducting payroll compliance audits, and regularly reviewing control measures.

For more information on the steps you can take to prevent wage theft, download our check list or contact ADP to discuss how we can help you manage payroll compliance.