The Victorian Parliament has introduced legislation making it a criminal offence for employers who withhold employee entitlements dishonestly. It would also introduce new record keeping offences to capture employers who falsify or fail to keep records for the purposes of concealing underpayments. A new agency, Wage Inspectorate Victoria, will be created to investigate and enforce the offences.

The legislation will come into effect on 1 July 2021 to allow for a reasonable implementation period.

A Victorian corporate employer will be liable to a maximum fine of nearly $1 million if it is proven that it dishonestly authorised or permitted another person to withhold an employee entitlement owed by the employer to the employee. Dishonesty is adjudged by what a reasonable person would know or suspect in the actual circumstances.

An employee entitlement means an amount payable or any other benefit payable or attributable by an employer to, or in respect of, an employee, and includes wages, salary, allowances, gratuities and the attribution of annual leave, long service leave, meal breaks and superannuation. The amount payable or attributable is in accordance with the relevant laws, contracts and agreements.

An employment entitlement will be withheld if it is not paid or distributed to the employee, or the employee is otherwise deprived of it. It would cover requiring an employee to pay back a portion of their wages to their employer and misrepresenting an employment relationship as an independent contract to avoid paying the entitlements owed.

It will be irrelevant whether the employee agreed to his or her entitlement being reduced to less than the minimum amount or benefit required under the relevant laws.

‘Relevant laws’ is not defined but presumably refers to statutory entitlements to minimum wages and employment conditions as set out in the Fair Work Act 2009 (Cth) awards and enterprise agreements made under the Fair Work Act, as well as entitlements under long service legislation. It may also apply to the Superannuation Guarantee contributions.

The intention is to prevent the amounts payable or benefits to be attributed to an employee not to be reduced below the amount or benefit required by these statutes. Furthermore, if there is an agreement that the employee be paid an amount or attributed a benefit above that minimum statutory standard, then that will happen. However, employers can still negotiate with employees to pay them a lesser amount or to reduce a benefit attributable to them in their employment, provided it does not fall below the minimum statutory standard.

A company will be implicated by one of its officers authorising or permitting the withholding, or the board of directors expressly or impliedly giving the authorisation or permission. It will also apply where a corporate culture exists that directed, encouraged, tolerated or led to the relevant conduct being carried out. However, if the employer can prove that it exercised due diligence to prevent the authorisation or permission, a higher standard will be applied when considering what is reasonable for a large body corporate than for a small business.

A similar offence applies to officers of employers who are directly involved in the withholding of entitlements. Guilty officers will be liable for up to 10 years’ imprisonment. They will have a defence if they prove they exercised due diligence to pay or attribute the employee entitlements to the employee.

Employers and the officers will also commit similar criminal offences if they falsify an employee entitlement record of an employee with a view to dishonestly obtaining a financial advantage for the employer or another person, or preventing the exposure of a financial advantage obtained by the employer or another person. For example, where an officer asks payroll staff to alter the number of hours an employee has worked on their timesheet, or an employer alters an employee’s payslip to provide a misleading rate of pay, with a view to dishonestly obtaining a financial advantage.

Employers and officers will also face criminal liability if they fail to keep proper records with a view to dishonestly obtaining a financial advantage, or preventing the exposure of a financial advantage obtained. Examples include where the employer pays the employee for work performed but does not keep a record of the hours of work performed, or the amount paid to the employee, or pays the employee for set shift hours and does not record the additional overtime worked, with a view to dishonestly obtaining a financial advantage.

A person who assists, encourages or directs the commission of the offence is taken to have committed the offence. For example, franchisors that assist, encourage or direct franchisees to dishonestly withhold employee entitlements could be found guilty of an offence.

Wage Inspectorate Victoria can bring criminal proceedings in relation to alleged employee entitlement offences. Inspectors will have expansive powers to investigate potential offences.