Australian employers that engage in deliberate wage theft now face up to 10 years in prison and a fine of $1.65 million, under new laws that came into effect this month.
Criminal underpayment laws came into effect from 1 January, making the intentional underpayment of an employee’s wages or entitlements a criminal offence.
This was previously only a civil offence, with no potential prison sentence applying.
“We can investigate suspected criminal underpayment offences and refer suitable matters for criminal prosecution,” the Fair Work Ombudsman said in guidance about the new laws.
“If a person is convicted of a criminal offence, a court can impose fines, prison time or both.”
If found guilty of deliberate wage theft, a boss will face a maximum of 10 years imprisonment and a fine of either three times the amount of the underpayment or $1.65 million, whichever is higher.
The company will also face a fine of up to $7.85 million.
This will apply to deliberate wage theft, not “honest mistakes”.
"A failure to make a payment, for example, due to a banking error would not be caught by the provision,” the bill’s explanatory memorandum said.
The penalties will only apply to underpayments that occur from this year and could apply to an employer paying someone below the minimum wage or not paying them the relevant penalty rates.
How to avoid jail time
There are protections in place to help businesses avoid a criminal prosecution.
These include a new Voluntary Small Business Wage Compliance Code, which outlines how an employer can prove that it does not intend to underpay its workers, as assessed by a few factors.
These include reference to the relevant award or enterprise agreement, staying up to date with changes to workplace laws, seeking advice from lawyers, and taking steps to fix an underpayment if it does occur.
If the Fair Work Ombudsman finds that a company has complied with this code, it cannot refer a business for prosecution.
The Ombudsman will also be able to enter into cooperation agreements with a company that has admitted to conduct that may amount to the criminal underpayment offence, meaning they will not pursue criminal prosecution but may still seek civil enforcement options.
The new powers to combat wage theft have been welcomed by the Australian Council of Trade Unions acting secretary Joseph Mitchell.
“The tough laws that come into force today will make a huge contribution to ending wage theft as a business model,” Mitchell said in a statement.
“Businesses are on notice and need to pay their workers properly, especially vulnerable younger workers.”
Underpayment in tech
There have been numerous examples of wage theft on a large scale in recent years, including many involving high-profile large organisations.
A recent report found that three-quarters of migrant workers are potentially earning below the casual minimum wage.
According to the survey by the Migrant Justice Institute, three-quarters of the 15,000 migrant workers surveyed were earning less than the minimum wage, and a quarter earned less than half of that rate.
In 2024, the government launched a new visa allowing migrants to temporarily remain in Australia in order to pursue a workplace exploitation claim against an employer.
Late last year, a Sydney IT company was fined after it was found to have underpaid a former employee by nearly $50,000.
Pure Telecom, trading as VMCN Solutions, was fined $7,000 and its sole director fined $1,400 after it was found that a man previously employed by the company was owed more than $48,000 in back-pay, and that the company had failed to comply with a Fair Work order to repay him.
The Ombudsman is also taking Perth-based tech company My IT Partner, trading as My Info Tech Partner, to court over its failure to repay an employee underpayments, with the business facing a penalty of up to $41,250.
