IR Reform proposes fines, jail time for wage thieving Employers, HR Managers

In April, the Albanese Government released the Criminalising wage underpayments and reforming civil penalties in the Fair Work Act 2009 consultation paper, which sought submissions on appropriate penalties for criminalising wage theft in line with its pre-election commitments.

The Department of Employment and Workplace Relations (DEWR) has sought feedback on multiple options, including imposing a new maximum penalty in excess of $4 million for “a serious crime” involving underpayment, along with increased fines for contravening the National Employment Standards (NES), an award or agreement term, or minimum wage order. Proposed increased fines would also extend to sham contracting, unreasonable requirements for workers to make payments from their wages, breaching recordkeeping and payslip requirements, failing to deliver on annual earnings guarantees, and providing false or misleading information to the Fair Work Ombudsman.

The paper provides an example of a bar owner contravening a modern award term by failing to consult his four part-time employees before changing the roster to alternating day and night shifts, indicating he could personally face penalties between $16,500 – $82,500 (depending on which sanction is applied) even though no underpayments occurred.

The paper is also seeking views on whether to solely criminalise “knowledge-based wage underpayment” offences, to capture employers who know they are not paying employees correctly, or whether it should introduce a “recklessness-based wage underpayment offence only”.

A “knowledge-based offence” exampled by the paper could include where a business owner and senior managers, such as the chief executive, HR and payroll managers (who would all be potentially liable as accessories), are aware that workers are being paid below the applicable award rates but believe it is the “market rate” and tell staff that paying them correctly would eat into their profits. Separately, a “recklessness-based offence”, could include an underpaying company director receiving newsletters from an industry body with updates about pay entitlements, including changes to penalty rates, but the messages are deleted without being read and comparisons are not made against the award.

DEWR sought submissions on appropriate penalties, “including a fine and/or a period of imprisonment”, for such offences and posed the question of whether criminal offences for record-keeping misconduct should be introduced “to complement a criminal offence for wage underpayment.

Submissions on the various sanctions proposed in the consultation paper were due by mid-May. Employer groups were generally critical of the Government’s desired reform, with ACCI insisting the “wage underpayment laws should not capture non-deliberate behaviour”.