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Deliberate Wage Theft Could Land Employers in Jail

Deliberate Wage Theft Could Land Employers in Jail

By Prime Advisory, 11 November 2023

Employers who engage in deliberate wage theft could be facing a jail term of up to 10 years and a fine of $7.8 million under legislation being debated in federal parliament.

The proposed legislation—part of the Labor Government’s Closing Loopholes Bill—is aiming to make intentional wage theft a criminal offence alongside a raft of other workplace reforms. 

In a media release, Minister for Employment and Workplace Relations, Tony Burke, said that it was time to eliminate a long-held “double standard”.

“If a worker steals from the till, it’s a criminal offence—as it should be. But in many parts of the country if an employer steals from a worker’s pay packet, it’s not,” he declared.

If the legislation is enacted, a fine will apply alongside the criminal offence. The proposed fine is three times the underpayment and:

  • For individuals: 5,000 penalty units (currently $1,565,000)
  • For businesses: 25,000 penalty units (currently $7,825,000)

The reforms are not intended to punish unintentional mistakes and a compliance ‘safe harbour’ would be introduced by the Fair Work Ombudsman for small businesses.

Wage theft is an umbrella term for employer activity that includes deliberately underpaying wages, intentionally withholding entitlements such as leave and penalty rates, and wittingly holding back required employee superannuation contributions.

Already Illegal in Some States

Deliberate wage theft is already illegal in Queensland, South Australia, and Victoria under state laws.

A 2018 Queensland Parliamentary Committee inquiry into wage theft found that the practice was widespread—impacting approximately one in five Queensland workers annually, or roughly 437,000 employees, and costing in excess of $1 billion each year in unpaid or underpaid wages.

While the bill is not intended to interfere with existing state legislation, it is unclear how the two laws would interact.

Along with criminalising wage theft, the bill also aims to create a series of reforms that include:

  • Introducing a new definition of ‘casual employee’ and creating an employee choice pathway for eligible casual employees to change to permanent employment.
  • Allowing the Fair Work Commission to set minimum standards for some (but not all) ‘gig economy’ workers and road transport industry workers.
  • Preventing enterprise agreement wages from being undercut by the use of labour hire (‘same job, same pay’).
  • Changing the defence to ‘sham contracting’ from a test of ‘recklessness’ to one of ‘reasonableness’.
  • Introducing a new Commonwealth criminal offence of industrial manslaughter.

However, the proposed legislation has received criticism from the Opposition and various industry bodies, leading to a delay in the inquiry’s reporting date—previously slated for late October.

Now, the bill has been referred to the Senate Education and Employment Legislation Committee for inquiry and report by February 1 2024.

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