Understanding the Changes to Wage Theft Laws: What Employers Need to Know
The Fair Work Legislation Amendment (Closing Loopholes) Act 2023 has brought significant changes to wage theft laws, imposing harsh penalties on employers who intentionally underpay their employees. Effective from 1 January 2025, these amendments aim to curb wage theft and protect employees' rights. Let's delve into the key aspects of these changes and what they mean for employers.
Current Laws
As it stands, only Queensland and Victoria have enacted specific wage theft laws. In these states, employers engaging in deliberate wage theft face severe penalties, including imprisonment. However, outside of Queensland and Victoria, employers faced civil liability for underpaying employees, with potential fines imposed by the court.
Changes Ahead
The new amendments will make wage theft a criminal offence at a Commonwealth level, applying to employers who intentionally underpay their employees. This means that employers who engage in conduct resulting in underpayment will face criminal prosecution. It's crucial to note that these laws target deliberate underpayment, with no leniency for honest mistakes or miscalculations.
The penalties for wage theft are significant, with a maximum penalty of 10 years' imprisonment and fines of up to $7.8 million for employers. These penalties apply to underpayments of employee entitlements under the Fair Work Act, modern awards, or enterprise agreements.
Enforcement and Compliance
The Fair Work Ombudsman (FWO) will be responsible for investigating wage theft allegations. Matters may then be referred to the Commonwealth Director of Public Prosecutions (CDPP) or the Australian Federal Police (AFP) for prosecution. Employers are encouraged to self-report under 'safe haven' provisions, which may mitigate penalties.
Protection for Small Businesses
Small businesses, defined as those employing 15 people or fewer, may avoid criminal prosecution by demonstrating compliance with the Voluntary Small Business Wage Compliance Code. This code, developed in partnership with government and industry groups, aims to support small businesses in meeting their wage obligations.
With the implementation of these new laws, it's essential for employers to ensure compliance with wage and employment regulations. Utilising a robust payroll system that accurately interprets relevant awards is crucial. By understanding and adhering to these laws, employers can protect their business, employees, and reputation in the long run.