Wage theft is now a criminal offence. Is your business up to scratch?

The Albanese Government’s Closing Loopholes employment law reforms continue to shape the workplace relations landscape, with a major change taking effect from 1 January 2025 – the criminalisation of wage and superannuation theft.

This new law means employers can now face criminal penalties for intentionally underpaying their staff, underscoring a clear message about fairness and accountability in the workplace.

To help you stay informed, we’ve answered some of the most common questions about these significant changes below.

Why were wage theft laws introduced in Australia?

The explanatory memorandum for the Closing Loopholes legislation notes that these new penalties are in place to:

• Combat the persistent problem of underpayments and wage non-compliance;
• Encourage compliance and deter wrongdoing, particularly intentional wrongdoing;
• Protect vulnerable workers, including migrant workers; and
• Promote a compliance culture in workplaces.

So, what are the new wage theft legal requirements?

Under these new laws, an employer commits an offence if:

• The employer is required to pay an amount to or for an employee under the Fair Work Act 2009 (Cth) (FW Act), a modern award, an enterprise agreement or another industrial instrument; and
• The employer engages in conduct that fails to pay the required amount to or for an employee in full on or before the date when the payment is due.

These penalties are intended to apply to underpayments that were committed intentionally by employers rather than those that were accidental or by mistake. However, in circumstances where the employer becomes aware of the mistake and doesn’t take steps to rectify it, the employer may also be at risk of the criminal penalty.

Aside from genuine mistakes, in establishing the offence, authorities may consider:

• Whether the business’ board or other authorised person intentionally engaged in the conduct or expressly, or implicitly authorised or permitted the conduct constituting the offence; or
• Whether a corporate culture existed within the business that directed, encouraged, tolerated, or led to the conduct occurring.

The Fair Work Ombudsman (FWO) has been given additional powers to investigate reports of such offences and, where appropriate, can escalate suspected breaches to the Commonwealth Director of Public Prosecutions and/or the Australian Federal Police.

What are the potential employer wage theft penalties?

Employers can face imprisonment of up to 10 years or a substantial fine, being:

• For a company, a maximum penalty of $7.825 million or three times the amount of the underpayment, whichever is greater.
• For an individual, $1.565 million or three times the amount of the underpayment, whichever is greater.

If an employer chooses to voluntarily self-disclose wage theft to the FWO, they may be able to enter into a written cooperation agreement with the FWO which would stop a referral of conduct for possible criminal prosecution. However, the FWO may still choose to take other enforcement action via civil litigation.

In a previous article, we discussed the new Voluntary Small Business Wage Compliance Code, established by the FWO in December 2024. The existence of this code means that small businesses (less than 15 employees) can’t be referred for criminal prosecution if they have complied with the Code despite underpaying an employee. This code is aimed at reducing the wage theft risk for employers and ensuring wage and superannuation compliance.

Proceedings may be commenced within six years after the commission of the offence. However, the criminal offence will only apply to relevant conduct from 1 January 2025.

What action should business owners take?

Get that fresh start in 2025:

• Ensure that any underpayment issues are resolved promptly;
• Consider an external payroll audit to ensure that wages are compliant; and
• Ensure that the business has a culture of compliance with workplace laws, including updated policies and procedures, regular employee training and open communication.

If any of this information has raised questions for your business regarding wage theft enforcement or you have another workplace matter you need assistance with, please contact the Citation Legal team for detailed advice specific to your business circumstances.

About our author

Samantha Shariev is an Associate at Citation Legal. She regularly advises and supports our clients with a wide range of workplace and employment issues.