Employers to face 10 years’ jail, hefty fines under proposed wage theft laws

Employers who deliberately underpay workers could be jailed for up to 10 years and fined $7.8 million under proposed new federal wage theft laws, while much larger fines will be levelled on businesses who engage in large-scale underpayment of their staff.

The crackdown on wage theft is a key plank of the federal government’s latest tranche of workplace reforms contained in the Closing Loopholes Bill, which is already facing a fierce backlash from peak business and employer groups.

Employment Minister Tony Burke will introduce the government’s latest tranche of workplace reforms into the parliament on Monday.Credit: AP

The draft laws, to be introduced to the parliament by Employment Minister Tony Burke on Monday, will create a new federal offence for wage theft which targets deliberate wrongdoing by businesses, and not those who make honest mistakes, or self-report and take reasonable steps to repay the correct wages.

The offence is tied to harsh penalties with a maximum fine of $7.8 million. However, in cases where the underpayment exceeds that amount employers will face fines of three times the value of the underpayment – upwards from $23.4 million.

Burke said dozens of highly publicised underpayment scandals had made clear that the current rules and penalties were not protecting workers.

“If a worker steals from the till, it’s a criminal offence – as it should be. But in many parts of the country if an employer steals from a worker’s pay packet, it’s not,” Burke said.

“It’s time to end this double standard once and for all.”

The proposed laws would provide a uniform national framework whereas wage underpayment offences currently only exist in Victoria and Queensland.

The measures will be complemented by $32.4 million to beef up the resources of the Fair Work Ombudsman, which will be responsible for investigating offences. Under the changes, the regulator can exercise its discretion not to pursue criminal proceedings if the business enters into a co-operation agreement.

Investigations by this masthead in recent years have exposed endemic underpayment of workers in the franchising industry, including 7-Eleven, Caltex, Domino’s Pizza, Pizza Hut, Retail Food Group. In 2020, 7-Eleven paid back $173 million to more than 4000 workers.

The hospitality sector has also been dogged with issues, with high-end restaurants owned by Neil Perry’s Rockpool Dining Group and Celebrity chef George Calombaris among those that have been embroiled in underpayment scandals.

The government’s decision to include an exemption from prosecution for employers found to have inadvertently unpaid workers is expected to go some way to assuaging concerns from the Business Council of Australia and peak bodies, which have argued that underpayments are often unintentional errors and due to Australia’s complex employment laws.

However, while the BCA has previously backed criminalising wage theft for “clear, deliberate and systematic underpayment” it raised concerns during the consultation process that the broader package of changes proposed would “add to rather than reduce that level of complexity”.

Ai Group has previously opposed introducing criminal penalties for the underpayment of wages, arguing it would disadvantage workers “by significantly delaying civil recovery of underpayments while criminal proceedings are taking place”.

The wage theft provisions are one of four key components of the proposed bill, which includes new measures to allow casuals to convert to permanent workers, safeguards for “gig economy” workers, and “same job, same pay” protections for labour-hire workers.

The Australian Chamber of Commerce and Ai Group this week called for the bill as a whole to be blocked.

Manager of Opposition Business Paul Fletcher accused Labor of seeking to rush the changes through the parliament, calling the bill a “direct attack on the efficiency and flexibility of the digital economy.”

“Millions of Australians have enthusiastically embraced digital platforms due to their convenience and innovative offerings. Labor wants to return to a rigid 1950s-style economy because that is what union bosses want,” Fletcher said on Saturday.

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