Proposed laws to criminalise wage theft

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The Federal Government has proposed increased penalties for employers that intentionally engage in wage theft as part of a swath of reforms aimed at protecting the rights of workers.

Part 14 of the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (the Bill) proposes the introduction of a new criminal offence for wage theft. This new offence would commence no later than 1 January 2025 and will only apply where intentional conduct is established.

It is proposed that any prosecution can only be commenced by the Commonwealth Director of Public Prosecutions (CDPP) or the Australian Federal Police (AFP). There is also a 6-year limitation period for commencing any prosecution.

The offence will occur if an employer:

  • is required to pay an amount to, on behalf of, or for the benefit of an employee under the Fair Work Act (FW Act) or a specified instrument;
  • engages in conduct (whether by act or omission) whereby an employer intentionally fails to pay wages or provide benefits owed to an employee;
  • the conduct results in a failure to pay the required amount in full on or before the day the amount is due for payment.

The new offence does not apply to superannuation guarantee obligations, which are covered by other legislation.

Assessing criminal conduct

The onus will be on the prosecutor to prove beyond reasonable doubt that the employer intentionally engaged in the relevant conduct. This means underpayments that are accidental, inadvertent or a genuine mistake will not be caught by the new offence. The Explanatory Memorandum provides an example of this where an employee is underpaid due to a genuine misclassification of an employee under an instrument.

To assist in establishing corporate criminal liability, it is proposed that relevant provisions of the Commonwealth Criminal Code will apply.


The maximum penalty for an individual is 10 years' imprisonment as well as a fine. The maximum fine for an offence can also take into account the quantum of the underpayment. The maximum payment for a company is the greater of three times the underpayment amount or 25,000 penalty units, which currently is $7,825,000. For an individual, the maximum fine is the greater of three time the underpayment amount or 5,000 penalty units, which currently is $1,565,000.

The Bill also proposes that the new offence will apply to all Australian governments, with various machinery provisions in the Bill to allow this to occur.

A voluntary small business wage compliance code

The Bill proposes that the Fair Work Ombudsman (FWO) prepares a voluntary code to assist small business with wage compliance. The Code is to be developed through a tripartite process involving employer and employee organisations. The voluntary code will be established before the commencement of the new criminal offence. If a small business employer has complied with the voluntary code, then the FWO is unable to refer the employer to the CDPP or the AFP for prosecution of the new wage theft offence.

Cooperation agreements

The Bill also introduces the ability of the FWO to enter into a cooperation agreement with employers. This is intended to allow an employer, in appropriate circumstances, to access "safe harbour" from potential criminal prosecution for wage theft. Whether the FWO agrees to enter into a cooperation agreement is reliant on a range of considerations including:

  • whether the employer has made a voluntary, frank and complete disclosure of the conduct;
  • the nature and level of disclosure;
  • whether the employer has cooperated with the FWO and their commitment to continued cooperation; and
  • the nature and gravity of the conduct.

Whilst a cooperation agreement is in place, an employer cannot be referred to the CDPP or the AFP for a contravention of the new wage theft offence. However, it does not stop an inspector instituting civil proceedings in relation to the conduct or referring other persons for prosecution. The FWO can also accept an enforceable undertaking whilst a cooperation agreement is in place. Where there is any inconsistency, the terms of the cooperation agreement will prevail over the terms of an enforceable undertaking.

Increases to civil penalties

In addition to the new criminal penalties, the Bill increases the existing civil penalties for employers five-fold. Unlike the criminal offence, these penalties can apply even if the conduct is accidental.

The new maximum penalty for body corporates would be the greater of 1,500 penalty units, which currently is $469,500 (up from $93,900), or three times the amount of the underpayment. With many high-profile underpayments ranging in the millions, this is a significant increase to the existing penalties.

Further, the Bill lowers the hurdle requirement for conduct to be a “serious contravention”. Currently, for an employer to have committed a “serious contravention”, it must have formed part of a “systematic pattern of conduct”. The new definition would remove this requirement, and only require that the conduct was done knowingly or recklessly.

The new maximum penalty for “serious contraventions” will be the greater of 15,000 penalty units (currently $4,695,000), or three times the amount of the underpayment.

Other changes

The Bill also proposes to modify the functions and powers of the FWO and its inspectorate to assist compliance and enforcement. The FWO will also be required to publish a compliance and enforcement policy, which is to include guidelines as to when an enforceable undertaking or a cooperation agreement will be entered into. The FWO is also required to consult with the National Workplace Relations Consultative Council before the compliance and enforcements policies are published.

Expanded union rights of entry to workplaces

Under the proposed changes in the Bill, the Fair Work Commission can grant exemption certificates to union officials who hold federal right-of-entry permits, allowing them to enter workplaces and access relevant records where they suspect employee underpayments, without the usual 24 hours' advance notice that is required for such union entries.

For more information about the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 and how the changes might apply to your organisation, please contact Lander & Rogers' workplace relations and safety legal experts.

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