Closing the wage theft, redundancy and domestic violence loopholes

Criminalisation of intentional wage and superannuation theft

The Act amends the Fair Work Act (Cth) (FW Act) to introduce a new wage theft offence which imposes criminal liability on employers for intentionally engaging in conduct resulting in underpayments to their employees.

These provisions will commence from the later of 1 January 2025 or the date on which the Minister declares a Voluntary Small Business Wage Compliance Code.

Employers will commit an offence if they:

• are required to pay an amount under the FW Act or an industrial instrument such as a modern award or enterprise agreement:
  • to an employee (such as wages or leave payments); or
  • for the benefit of an employee (such as superannuation contributions); and
• intentionally engage in conduct that results in a failure to pay those amounts in full, on or before the day on which payment is due.

There are some limited exceptions for certain employees in relation to superannuation contributions, long service leave payments, and some leave payments.

Prosecution for this new wage offence can only be commenced by the Director of Public Prosecutions or the Australian Federal Police.

Maximum penalties for companies that engage in wage theft will be:

• if the court can determine the amount of the underpayment, the greater of 3 times the amount of the underpayment and 25,000 penalty units (currently $7.825 million); or
• if the court can’t determine the underpayment, 25,000 penalty units.

For individuals, the maximum penalties will be:

• imprisonment for up to 10 years;
• if the court can determine the amount of the underpayment, the greater of 3 times the amount of the underpayment and 5,000 penalty units (currently $1.5 million); or
• if the court can’t determine the underpayment, 5,000 penalty units.

If an employer identifies underpayments within its workplace, it can seek ‘safe harbour’ from criminal prosecution by reporting the matters to Fair Work Ombudsman (the FWO). The FWO may then decide to enter into a written ‘cooperation agreement’ with the employer.

To decide whether to enter into a cooperation agreement with an employer, the FWO will take into account:

• whether the employer has made a voluntary, frank and complete disclosure of the underpayment, and the nature and level of detail of the disclosure;
• the employer’s level of co-operation with the FWO and the FWO’s assessment of its continued co-operation (e.g. providing information about the underpayment and remedying the effects of the underpayments); and
• the nature and gravity of the underpayments, the circumstances in which the underpayments occurred and any other matters prescribed by the regulations.

The Act also provides that the Minister may declare a Voluntary Small Business Wage Compliance Code, and that the FWO must not refer a matter to the DPP or the AFP where it is satisfied that a small business employer has complied with that Code.

Limits to the small business redundancy exemption

The FW Act provides that small business employers (those with less than 15 employees) are not required to pay redundancy pay under the National Employment Standards (NES).

In the period leading up to liquidation or bankruptcy, employers often look at incrementally decreasing their workforce to minimise operating costs, and may become a “small business employer” as a result of such workforce decreases. Where (for example) bookkeeping, payroll and other administrative staff are retained to assist with the orderly wind up of the business, they miss out on redundancy entitlements if the employer has become a small business employer due to the termination of its other employees.

The changes to the FW Act mean that an employee of a small business will be entitled to redundancy pay under the NES, where their employment was terminated due to redundancy and:

• the employer is bankrupt or in liquidation (other than only because of a members’ voluntary winding up);
• the employer is a small business employer because one or more employees had their employment terminated; and the earlier terminations occurred:
  • in the 6 months before the employer became bankrupt or went into liquidation, or an insolvency practitioner was appointed; or
  • due to the insolvency of the employer.

This change does not affect how the small business redundancy exemption currently applies to viable small businesses, including businesses that have restructured from being a large employer and are continuing to trade in the ordinary course.

This change took effect on 15 December 2023. It will not apply to employees terminated before that date (or if the terminations causing the business to become a small business employer occurred before then).

Protection for employees experiencing family and domestic violence

The Act also increases the safeguards available to employees who are subject to family and domestic violence (FDV).

Previously, being a person subjected to FDV was not a protected attribute in the FW Actor under other Federal anti-discrimination laws, but was protected by some State and Territory anti-discrimination laws.

The Act amends the FW Act to:

• include “subjection to FDV” as a protected attribute;
• prohibit an employer from taking adverse action against an employee or prospective employee on the basis that they have been subjected to FDV; and
• prohibit terms in enterprise agreements and modern awards that discriminate against a worker for FDV-related reasons.

These changes commenced on 15 December 2023.

Next steps

With the new year well in train, it is timely for businesses to consider how these changes will impact upon your operations and personnel.

If you would like to discuss how best to navigate the new regime, please don’t hesitate to contact us.