Tackling Wage Underpayment in Australia: An Overview of Proposed Reforms
Background
The Albanese Government made a pre-election promise to implement recommendations made by the Migrant Workers’ Taskforce to tackle wage underpayment and non-payment. These reforms would see underpaying employers to face fines greater than $4 million or three times the underpaid sum involved. Individuals such as directors and HR managers would also face penalty charges of up to $825,000 per breach and potential jail time.
The Department of Employment and Workplace Relations (DEWR) released a report proposed two potential options to deliver the promise of criminalising wage theft without undermining the integrity of current state-based laws. These proposed options are summarised below.
Option A
Option A proposes to increase the maximum penalty to 1500 penalty units ($412,500), or 15,000 penalty units ($4,125,000) for a serious crime. These penalties would apply to conduct including:
• breaching a National Employment Standard;
• breaching a Modern Award;
• breaching a minimum wage order;
• sham contracting;
• unreasonable requirements for workers to make payments from their wages;
• breaches to recordkeeping and payslip requirements;
• failing to deliver on annual earnings guarantee; and
• providing false or misleading information to the FWO.
This Option would also entail changes to the penalties faced by individuals, where the maximum penalty would increase to 300 penalty units ($82,500) or 3000 penalty units ($825,000).
For an individual the new maximum penalty would be 300 penalty units ($82,500) for a minor contravention, or 3000 penalty units ($825,000) for a serious contravention. The DEWR report also considers that a period of imprisonment may be appropriate for knowledge-based and recklessness-based underpayment offences.
According to the report, this option “is intended to balance enhancing the deterrent impact of maximum penalties with preserving clarity for applicants, respondents and the court when calculating the maximum applicable penalty in each case”.
Option B
Option B proposes to add a new provision to the Fair Work Act that would raise the highest possible penalty for breaking any civil remedy provision related to underpayment. The primary intention is that instead of having to prove the exact amount of the underpayment, it would be enough to show that underpayment occurred. If there was a violation related to underpayment, the maximum penalty would be five times the current limit stated in subsection 539(2) of the Fair Work Act.
Option B seeks to ensure a consistent and comprehensive approach to penalising and deterring underpayments by making higher penalties available if there has been an underpayment, regardless of the specific contravention being alleged in that particular case.
Knowledge-based Wage Underpayment
In addition, the DEWR report is seeking input on whether to make “knowledge-based wage underpayment” offenses the exclusive basis for criminalisation or to establish a specific offense for “reckless-based wage underpayment.” The latter option applies to employers who might not deliberately underpay their workers but are aware of a substantial risk that they are not paying them correctly and proceed “even though it is unjustifiable to take that risk”.
A third proposed option is to introduce a tiered approach in which both a knowledge-based wage underpayment offence and a recklessness-based wage underpayment offence would be inserted into the Fair Work Act, with distinct graduated penalties assigned to each offense based on the level of culpability.
Key Takeaways/Conclusion
The proposed reforms are expected to improve the enforcement of minimum wage standards and provides an effective deterrent against underpayment of wages. The proposed reforms signal the government’s determination to put an end to wage theft and protect the rights of employees.
It is imperative for businesses to review their employment practices and ensure compliance with the proposed reforms to avoid the risk of severe penalties, fines and even imprisonment. If you have any questions about the potential reforms or wage underpayment in general, please do not hesitate to contact Nick Stevens, Peter Hindeleh, Daphne Klianis or Josh Hoggett.
