As of 1 January 2025, wage theft attracts criminal liability under the Fair Work Act 2009 (Cth) (FW Act).

An employer commits a wage theft offence if it fails to pay an amount payable under a modern award, enterprise agreement or order made under the FW Act to, on behalf of, or for the benefit of, an employee.

If the non-payment is the result of intentional conduct, the employer is liable to be prosecuted for committing a criminal offence.

If the non-payment is not intentional, the employer will continue to face civil liability, i.e. exposure to a penalty being imposed.

Guide to compliance

The Fair Work Ombudsman (FWO) recently released the Voluntary Small Business Wage Compliance Code to provide a guide for employers in avoiding criminal liability for wage theft. If a small business employer (i.e. an employer with an employee head count of less than 15) complies with the Code in relation to the non-payment, the FWO must not refer the employer’s conduct for prosecution. The FWO has made it clear that the Code provides a guide for all employers – not just small businesses – in avoiding criminal liability for wage theft.

The Code describes what steps will help an employer escape criminal prosecution if it is found not to have paid employees amounts due under the FW Act, an applicable award or enterprise agreement.

Steps to avoid underpayment

The Code suggests that the risk of prosecution will be reduced if, before the employer became aware of the underpayment, it made reasonable efforts to work out the correct rates of pay and entitlements for the affected employees by:

• looking at the applicable award or enterprise agreement, and any relevant FW Act provisions, and considering:
  • the nature of the enterprise;
  • the role and duties of the employee;
  • the correct classification of the employee’s role;
  • minimum rates of pay, loadings or allowances, penalty rates or overtime, and any other separately identifiable amounts; and
  • any other requirements relating to rates of pay for the employee, such as annualised wages or piece rates;
• only relying on information about each employee’s role, duties, classification, relevant qualifications, age, hours and location of work that the employer has considered and reasonably believes is accurate;
• seeking information or advice from reliable sources, e.g. state chamber of commerce, traders or professional associations, industrial lawyers, Fair Work Commission or FWO; and
• making reasonable efforts to stay up to date with its obligations regarding employee pay and entitlements, including changes to:
  • the FW Act and the applicable award or enterprise agreement; and
  • the employee’s circumstances, such as the employee’s role, duties, classification, relevant qualifications, age, hours or location of work.

Steps after becoming aware of underpayment

The risk of prosecution will be reduced when the employer becomes aware of the underpayment if it took reasonable steps to rectify the underpayment by promptly repaying the amounts to the employees affected and taking proactive steps to prevent the same issues from arising in future (e.g. seeking information or advice from reliable sources, and taking steps to remedy any mistakes or deficiencies in the employer’s systems).

The risk of an employer facing criminal prosecution for wage theft will also be lessened if:

• the underpayment arose from a mistake or error in payroll processes or by a financial institution;
• the underpayment arose because of ambiguity or competing interpretations of obligations in relation to employee pay, and the employer took a reasonable but incorrect interpretation;
• the employer became aware of the underpayment when it proactively undertook an audit of their payroll compliance; or
• the quantum of the underpayment was minimised because the employer took prompt steps to rectify it after becoming aware of the issue.

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