<?xml version="1.0" encoding="ISO-8859-1"?> <docID>337233</docID> <postdate>2025-02-02 04:00:29</postdate> <headline>New wage theft laws come with lumpy consequences</headline> <body><p><img class="size-full wp-image-330882" src="https://citynews.com.au/wp-content/uploads/2024/10/20181212001376073962-original-resized.jpg" alt="" width="900" height="600" /></p> <caption><span style="font-weight: 400;">"These new laws reinforce that ignorance of the law is no excuse and that all employers must now be even more alert to the complexities of the minimum terms and conditions under which they engage their employees," writes Richard Calver</span>. (Mick Tsikas/AAP PHOTOS)</caption> <p><span class="kicker-line"><span style="font-weight: 400;">"Criminal sanctions may have an important deterrent effect, but they're not going to alter the vast majority of cases of underpayment of wages, often from a lack of understanding of awards and enterprise agreement terms," writes industrial law expert </span><b>RICHARD CALVER</b></span><span style="font-weight: 400;"><span class="kicker-line">.</span> </span></p> <p><b>From 1 January, the </b><b><i>Fair Work Act</i></b> <b>makes it a criminal offence to intentionally underpay an employee, so-called wage theft.</b><span style="font-weight: 400;"> </span></p> <p><img class=" wp-image-270643" src="https://citynews.com.au/wp-content/uploads/2022/10/Richard-Calver-2022.jpg" alt="" width="272" height="351" /></p> <caption>Richard Calver.</caption> <p><span style="font-weight: 400;">There are also increased civil penalties for employers who are found to have unintentionally underpaid an employee. </span></p> <p><span style="font-weight: 400;">These changes were part of the staggered introduction of a large number of changes to employment law brought about by the “Closing the Loopholes†statutes that came into effect in late 2023 and early 2024. </span></p> <p><span style="font-weight: 400;">Before diving into the details, a sidebar. These days, I’m fascinated by AI and what perspective the robots bring to bear on issues. So, I asked the Microsoft AI application Copilot to generate some material about the new underpayment laws. This is what it said: "Laws have been enacted to protect workers from unfair pay practices. These laws are designed to ensure that employees receive the wages they are rightfully owed for their labor (sic). </span></p> <p><span style="font-weight: 400;">"They address various forms of wage theft, including underpayment, failure to pay overtime, and misclassification of employees as independent contractors. </span></p> <p><span style="font-weight: 400;">"The new regulations also impose stricter penalties on employers who violate these laws, providing more robust mechanisms for employees to report and recover stolen wages. By holding employers accountable, these laws aim to create a fairer and more just workplace environment."</span></p> <p><span style="font-weight: 400;">The perspective that this extract reflects appears to be entirely focused on employee rights. </span></p> <p><span style="font-weight: 400;">The other issue is the recitation of the concept of “fairness†by the robotic intellect, something I find ironic given the use of drones to kill in the Middle East and in Ukraine, and indicative of the need to ensure that we cut through to the morals of the creators of these machines rather than vesting robots with a sense of morality. </span></p> <p><span style="font-weight: 400;">The bias of the human content creator is evident: the extract in no way questions the utility of potentially applying very large fines to inadvertent underpayments, for example, where a small or medium-sized employer may not be able to navigate the complexities of employment law. </span></p> <p><span style="font-weight: 400;">So, in order for you to come to your own opinion about these new laws, I’ll first explain some of the detail, then give you my take on the ramifications. </span></p> <p><span style="font-weight: 400;">My main concern, or bias if you like, is in having laws that everyone should be able to access and understand seeing as employment, work, is such a fundamental element of who we are, providing meaning and focus to the existence of many. </span></p> <p><span style="font-weight: 400;">As I will show, these laws unfortunately fail the simplicity test. In addition, criminal sanctions may have an important deterrent effect, but their introduction is not going to alter the vast majority of cases of underpayment of wages, which are often associated with a lack of understanding of awards and enterprise agreement terms. </span></p> <p><span style="font-weight: 400;">Having said that, I believe that every employee has a right to be paid the wages and entitlements which they are legally entitled to under Australian law. </span></p> <p><span style="font-weight: 400;">The new laws relate to conduct after the date of effect ie from January 1. There is no retrospective application. From that date, an employer commits an offence where:</span></p> <ul> <li><i><span style="font-weight: 400;"> the employer is required to pay an amount to, on behalf of, or for the benefit of, an employee under the Fair Work Act or a specified instrument (for example, an enterprise agreement, modern award or an order of the Fair Work Commission), and</span></i></li> <li><i><span style="font-weight: 400;"> the required amount is not a contribution payable to a superannuation fund for the benefit of the employee or certain other amounts called “excluded amount†eg long service leave under state or territory legislation, and </span></i></li> <li><i><span style="font-weight: 400;"> the employer engages in conduct and </span></i></li> <li><i><span style="font-weight: 400;"> the conduct results in a failure to pay the required amount to, on behalf of, or for the benefit of, the employee in full on or before the day when the required amount is due for payment.</span></i></li> </ul> <p><span style="font-weight: 400;">For the first two elements of this offence are strict or absolute liability that is the question to be asked is at was the alleged underpaid amount required to be paid to the employee at law. </span></p> <p><span style="font-weight: 400;">The other two elements require the prosecution to prove beyond reasonable doubt that the employer intentionally engaged in the conduct complained of and intended that their conduct would result in a failure to make a required payment to the employee in full on or before the day when the required amount was due to be paid. </span></p> <p><span style="font-weight: 400;">This wage theft offence is punishable on conviction by a fine for body corporates to the greater of $8,250,000, or three times the amount of the underpayment and a term of imprisonment of not more than 10 years and/or a hefty fine for individuals.</span></p> <p><span style="font-weight: 400;">Where the employer did not intend to underpay its employees there are increased penalties. </span></p> <p style="font-weight: 400;">For individuals and incorporated small business employers, maximum penalties will not change, including for serious contraventions. Those penalties are as follows:</p> <ul style="font-weight: 400;"> <li><em>$18,780 (individuals) and $93,900 (incorporated small business employers) for a contravention; and</em></li> <li><em>$93,900 (individuals) and $469,500 (incorporated small business employers) for a serious contravention.</em></li> </ul> <p style="font-weight: 400;">But for non-small business employers the penalties increase to $495,000 per contravention or three times the amount of the underpayment, whichever is greater. Where the contravention amounts to a “serious contravention†under the <em>Fair Work Act</em>, the maximum penalties increase to $4,950,000 per contravention for a body corporate (other than a small-business employer)</p> <p><span style="font-weight: 400;">The threshold for what is a serious contravention has been lowered. As part of the new laws, a serious contravention can arise where there has been a "knowing or reckless" contravention. This is instead of the previous threshold of "knowing and systematic".</span></p> <p><span style="font-weight: 400;">The Fair Work Ombudsman (FWO) oversees compliance with the new laws. A feature of these laws is an emphasis on self-reporting. Employers who engage in wage theft may be able to avoid criminal penalties if they self-report and, if a small business, comply with a new code called the Voluntary Small Business Wage Compliance Code. </span></p> <p><span style="font-weight: 400;">For other businesses, the mea culpa is entering into a "co-operation agreement" with the FWO. While these actions stop referral for criminal prosecution, self-reporting will not protect employers from civil recovery and penalty actions by the FWO.</span></p> <p><span style="font-weight: 400;">These laws mean that the payroll process should be undertaken with rigour. I’ve seen lawyers advise that audits should be undertaken, of course using lawyers so that legal professional privilege applies, that is the communications between the employer and the lawyer can’t be used in court proceedings. </span></p> <p><span style="font-weight: 400;">The new laws reinforce that management needs to fully understand the instruments that apply to their personnel. Mastering this understanding is often a time consuming process and can be counter intuitive. </span></p> <p><span style="font-weight: 400;">Let me give you an example from my own experience with a medium-sized building business. </span></p> <p><span style="font-weight: 400;">The owners of the business were unaware that redundancy is very broadly defined in the main award that applies to building industry employees. </span></p> <p><span style="font-weight: 400;">Under that award, and against its plain and ordinary meaning, redundancy is defined as a situation where an employee ceases to be employed by an employer to whom the award applies, other than for reasons of misconduct or refusal of duty.  </span></p> <p><span style="font-weight: 400;">Obviously, this definition of redundancy has a far wider reach than its ordinary meaning, which is where a business no longer needs an employee's role to be done by anyone.</span></p> <p><span style="font-weight: 400;">The building industry award obligation to make redundancy payments may include a situation where:</span></p> <ul> <li style="font-weight: 400;" aria-level="1"><i><span style="font-weight: 400;">the employer no longer requires the employee due to lack of work or restructuring (the usual circumstance) or</span></i></li> </ul> <ul> <li style="font-weight: 400;" aria-level="1"><i><span style="font-weight: 400;">the employer is letting the employee go due to performance issues or</span></i></li> </ul> <ul> <li style="font-weight: 400;" aria-level="1"><i><span style="font-weight: 400;">the employee </span></i><b><i>resigns</i></b><i><span style="font-weight: 400;"> after at least 12 months of service.</span></i></li> </ul> <p><span style="font-weight: 400;">An employee is not be eligible for a redundancy payment only if:</span></p> <ul> <li style="font-weight: 400;" aria-level="1"><i><span style="font-weight: 400;">they are terminated due to misconduct or refusal of duty or</span></i></li> </ul> <ul> <li style="font-weight: 400;" aria-level="1"><i><span style="font-weight: 400;">they have been engaged for less than 12 months and the employee resigned.</span></i></li> </ul> <p><span style="font-weight: 400;">It is the type of anomaly this example highlights that can trip up many employers. </span></p> <p><span style="font-weight: 400;">It is just one example of an award and employment regulatory system that is overly complex and often difficult to navigate. </span></p> <p><span style="font-weight: 400;">These new laws therefore reinforce that ignorance of the law is no excuse and that all employers must now be even more alert to the complexities of the minimum terms and conditions under which they engage their employees. </span></p> <p>https://citynews.com.au/2025/fair-work-raises-bar-on-workplace-policy-training/</p> <p><span style="font-weight: 400;"> </span></p> </body>