Australia Criminalizes Wage Theft — What Employers Should Know

As of Jan. 1, 2025, it is a federal criminal offense for employers to intentionally underpay their employees.

What Are the Changes?

In short, employers who intentionally fail to pay an employee a “required amount” under the Fair Work Act 2009 (Cth) (FW Act), a modern award or enterprise agreement could be subject to up to 10 years imprisonment and/or a fine of up to the greater of:

• Three times the amount of the underpayment.
• $1.565 million for individuals or $7.825 million for corporations.

Underpayments that are accidental, inadvertent, or based on a genuine mistake are not intended to be caught by the new offense.

How Will Intention Be Proved?

To be found guilty of the new criminal offense, an employer must have intentionally engaged in conduct, with that intentional conduct resulting in a failure to pay a “required amount” to an employee in full on or before the day the “required amount” is due for payment.

To establish the intention of a company, it must be proved that the company expressly, tacitly, or impliedly authorized or permitted the commission of the offense. Pursuant to section 12.13 of the Criminal Code (Cth), this can be done by proving that:

• The body corporate’s board of directors intentionally carried out the relevant conduct or expressly, tacitly, or impliedly authorized or permitted the commission of the offense.
• A high managerial agent of the body corporate intentionally engaged in the relevant conduct or expressly, tacitly, or impliedly authorized or permitted the commission of the offense.
• A corporate culture existed within the body corporate that directed, encouraged, tolerated, or led to noncompliance with employer pay obligations in the FW Act and industrial instruments.
  
• The body corporate failed to create and maintain a corporate culture that required compliance with employer pay obligations in the FW Act and industrial instruments.

Very few companies are likely to fall within 1) or 2) above (i.e., in very few companies would the board of directors or senior management knowingly or recklessly permit or engage in the underpayment of employees).

However, under 3) and 4) above, the concept of intention goes beyond conduct that is authorized or permitted. In addition, a company can be found to have intentionally underpaid its employees where there was a “corporate culture” that tolerated noncompliance or where the company failed to create and maintain a “corporate culture” that required compliance.

Create and Maintain a Compliance Culture 

Employers should carefully consider:

• What steps they can take to ensure that their “corporate culture” does not tolerate noncompliance with employer pay obligations.
• How they can create and maintain a “corporate culture” that requires compliance with employer pay obligations.

Current systems and processes may not be enough to establish that the employer has a corporate culture of compliance with employer pay obligations. To create and maintain a corporate culture of compliance, employers should consider undertaking the following steps:

• Introduce a wage integrity policy that sets out the employer’s zero-tolerance attitude toward underpayments and describes how an employee can raise a concern that they have not been paid properly.
• Implement a wage compliance framework that outlines the employer’s plan to, as far as possible, ensure compliance with employer pay obligations, including key steps such as undertaking risk assessments, performing regular audits, and future-proofing the system.
• Ensure relevant staff and managers are appropriately trained in relation to compliance with employer pay obligations.

Key Takeaways

Given the broad circumstances in which an employer can be said to have intentionally underpaid its employees, it is essential that employers take appropriate steps to ensure that their “corporate culture” does not tolerate noncompliance with employer pay obligations. Employers who do not take proactive measures risk prosecution under the new federal criminal wage theft offense.

Jake Reddie is an attorney with HFW in Sydney. © 2025 HFW. All rights reserved. Reposted with permission of Lexology.