Co-authored by Dylan Anderson
As of 1 January 2025 employers will be held criminally liable for intentional underpayment of wages. The offence only applies to intentional underpayment that occurs after the provisions take effect.
Elements of the offence
To establish an offence, it must be shown that an employer was:
1. Required to pay an amount to, on behalf of, or for the benefit of an employee (including wages, leave entitlements or superannuation); and
2. The employer has intentionally done something that intentionally results in those amounts not being paid on or before the day they are due.
The intention of the employer must be assessed to determine whether it meets the requisite criteria under section 5.2 of the Criminal Code Act. This offence does not apply to circumstances of honest mistake, due to the lack of intent to underpay.
Penalties for the offence
The offence carries a maximum of 10 years imprisonment and/or a maximum fine of the greater between:
• Three times the amount of the underpayment; or
• For individuals $1,565,000; or
• For a body corporate $7,825,000.
Implications for small businesses
Small businesses are provided greater protection against a charge of intentional wage underpayment via the Voluntary Small Business Wage Compliance Code (the Code). Compliance with the Code is achieved where a small business employer doesn’t intend to underpay their employee. The difference for a small business stems from the additional consideration that the Fair Work Ombudsman (FWO) must consider when determining the relevant intention, this includes:
• Any steps taken by the business to check they are paying their employees correctly; or
• Any steps taken after the business finds out about the underpayment such as
o Correcting the mistake; or
o Promptly back paying workers.
The small business need not comply with every factor in the Code, but the FWO will look holistically at the circumstances to determine whether they comply with the Code. Where this is found, the FWO cannot bring charges against the small business.
Civil penalties for contraventions increased
As of 1 January 2025, there will also be an increase in the maximum penalty payable for civil contraventions of Australian workplace laws. The maximum penalty for companies with 15 or more employees will now be as follows:
• The greater of $495,000 or three times the underpayment amount per contravention; or
• The greater of $4,950,000 or three times the underpayment amount for serious contraventions.
If you have any questions about the potential implications of these legislative changes, please contact Coleman Greig Lawyers Employment Law team.
