Employment law update: Criminalising intentional underpayment

The Fair Work Ombudsman has urged employers and employees with the new Fair Work Legislation (Closing Loopholes) Act 2023 (Cth) (“Closing Loophole Laws”).

One significant change is that, starting not before 1 January 2025, intentional underpayment of wages will be a criminal offence.

This means that should an employer intentionally engage in conduct that results in a failure to pay an employee money due to them on or before the money is due, they may have committed an offence. This can include a failure to make required superannuation contributions.

Penalties for companies can be three-times the amount of the underpayment or $7,825,000.00 (whichever is greater). If the court cannot determine the amount of the underpayment, the maximum penalty is $7,825,000.00.

Individuals can face penalties too. This can include imprisonment for up to 10 years, or a fine of either three-times the underpayment or up to $1,565,000.00 (where the court can determine the underpayment). They can also face both fines and imprisonment.

A Voluntary Small Business Wage Compliance Code will be established before the changes take effect and should a business qualify as a small business and comply with the code, they won’t be prosecuted for underpaying their employees.

Fair Work Ombudsman Anna Booth has also made clear that these laws are to apply only to intentional underpayments.

“Employers should know – these laws don’t apply to those who unintentionally underpay their employees or pay the wrong amount by mistake,” Ms Booth said.

This article is a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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• employment law