Wage theft as a criminal offence
Published on March 25, 2025 by Michael Barnes
This article was first published in Precedent Magazine, Issue 184, September/October 2024.
The expression ‘wage theft’ is a shorthand reference to employers failing to pay their employees the appropriate rates and benefits under the relevant legislative provisions including subordinate legislation. The Commonwealth Parliament has made such failures in prescribed circumstances an offence. The introduction of such legislation by the Parliament was the subject of much public comment. In this article, I seek to highlight some of the key changes.
An employer facing criminal penalties is not a novel concept. Employers in the workplace health and safety context have been exposed to a range of criminal penalties going back over 30 years throughout Australia. Employers which are corporations have been the subject of regulatory regimes including criminal penalties for behaviours such as insider trading and cartel conduct.
The Fair Work Act 2009 (Cth) (FWA) has long-established provisions dealing with offences. For instance, s674 sets out offences in relation to the Fair Work Commission (FWC) and provides:
‘Insulting or disturbing an FWC Member
(1) A person commits an offence if:
(a) the person engages in conduct; and
(b) the person’s conduct insults or disturbs an FWC Member in the performance of functions, or the exercise of powers, as an FWC Member.
Penalty: Imprisonment for 12 months.
Using insulting language
(2) A person commits an offence if:
(a) the person uses insulting language towards another person; and
(b) the person is reckless as to whether the language is insulting; and
(c) the other person is an FWC Member performing functions, or exercising powers, as an FWC Member.’
It is made equally clear by the FWA that contravening a civil liability provision does not constitute an offence.
The issues of underpayment are not necessarily straightforward. There can be factual disputes and interpretation disputes. Modern awards deal with indicative roles and the characteristics typically involved in describing duties and skills. It can be a complex task to identify the correct classification.
An issue that warrants further consideration is the liability of the Australian Government under a civil remedy provision. The definition of Australian Government includes any State. Clearly a topic for review another time. This article also does not seek to explore in detail all aspects associated with the conduct of a criminal prosecution and the evidentiary burden associated with such prosecution.
Key legislative changes
In December last year, the Commonwealth Parliament passed the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (FWLAA). Within pt 14 there were amendments to the Fair Work Act 2009 (FWA) and the Federal Court of Australia Act 1976 (FCAA). These amendments created the offence of wage theft and are intended to come into effect on 1 January 2025.
The amendments are to operate prospectively although provision is made for a course of conduct constituting offence where part of the course of conduct commenced prior to 1 January 2025.
The FWLAA provides:
‘327A Offence – failing to pay certain amounts as required
(1) An employer commits an offence if:
(a) the employer is required to pay an amount (a required amount) to, on behalf of, or for the benefit of, an employee under:
(i) this Act; or
(ii) a fair work instrument; or
(iii) a transitional instrument (as continued in existence by Schedule 3 to the Transitional Act); and
(b) the required amount is not an amount covered by subsection (2); and
(c) the employer engages in conduct; and
(d) the conduct results in a failure to pay the required amount to, on behalf of, or for the benefit of, the employee in full on or before the day when the required amount is due for payment.
Note 1: For the penalty for an offence against this subsection, see subsection (5).
Note 2: A single payment to, on behalf of, or for the benefit of, an employee in relation to a particular period may comprise more than one required amount. For example, a single payment consisting of:
(a) a required amount referable to wages earned during the period; and
(b) a required amount referable to paid leave taken during the period.’
By s327A(1), the focus is on the employer committing an offence. However, it needs to be remembered that the FWA does not cover all employers and employees in Australia.
Specifically, the employer under consideration must be a national system employer. From a New South Wales perspective, this would not, for instance, capture local government entities, the Department of Education and/or the State of New South Wales as an employer.
The concept of ‘required to pay’ for the benefit of an employee relates to a mandatory obligation as arising under the FWA or under a fair work instrument. A fair work instrument is defined by the FWA as a modern award, enterprise agreement, workplace agreement or an FWC order.
This offence does not relate to a breach of the terms of a contract of employment, for example, principal and contractor and/or contractor and sub-contractor.
By the operation of s327A(1)(b) and s327A(2)(b), the failure to pay the required amount does not extend to a contribution payable to a superannuation fund, and is not referable to the employee taking long service leave, paid leave to which they are entitled by reason of being a victim of crime, or a period of paid leave to which the employee is entitled due to service on a jury or for emergency services duties.
The employer’s conduct relates either to a failure to pay the required amount in full on or before the date when the required amount is due. The provisions of the FWA and any relevant fair work instrument will need to be considered to determine when the amount is due.
The role of intention
In the criminal law, practitioners classically speak of mens rea and actus rea. The FWLAA focuses on absolute liability and a fault element: intention.
Absolute liability applies to s327(1)(a) and s327(1)(b).
Section 6.2 of the Criminal Code Act 1995 (Code), found in the Schedule, provides:
‘6.2 Absolute liability
(1) If a law that creates an offence provides that the offence is an offence of absolute liability:
(a) there are no fault elements for any of the physical elements of the offence; and
(b) the defence of mistake of fact under section 9.2 is unavailable.
(2) If a law that creates an offence provides that absolute liability applies to a particular physical element of the offence:
(a) there are no fault elements for that physical element; and
(b) the defence of mistake of fact under section 9.2 is unavailable in relation to that physical element.
(3) The existence of absolute liability does not make any other defence unavailable.’
If it is found that the required payment has not been made, there will be no discussion about liability for that transgression or for any act or omission which is part of the transgression. There will be no discussion as to the intent or issues, such as a mistake of fact, for any act or omission.
The consideration of intention relates to 327A(1)(c) and 327A(1)(d).
This fault element is defined in the Schedule of the Code as follows:
‘5.2 Intention
(1) A person has intention with respect to conduct if he or she means to engage in that conduct.
(2) A person has intention with respect to a circumstance if he or she believes that it exists or will exist.
(3) A person has intention with respect to a result if he or she means to bring it about or is aware that it will occur in the ordinary course of events.’
This definition of intention is not exhaustive and does not extend to reckless or indifferent behaviours.
The carrot
Cooperative agreements
An employer at risk of a prosecution will avoid a prosecution if it can persuade the Fair Work Ombudsman to enter a written agreement, referred to as a cooperative agreement. The effect of such an agreement is that the Ombudsman must not refer conduct that is covered by the agreement to the Director of Public Prosecutions or the Australian Federal Police for a possible offence.
However, note s717B(2) of the FWLAA, which provides:
‘The Fair Work Ombudsman must have regard to the following matters in deciding whether to enter into a cooperation agreement with a person in relation to conduct:
(a) whether in the Fair Work Ombudsman’s view the person has made a voluntary, frank and complete disclosure of the conduct, and the nature and level of detail of the disclosure;
(b) whether in the Fair Work Ombudsman’s view the person has cooperated with the Fair Work Ombudsman in relation to the conduct;
(c) the Fair Work Ombudsman’s assessment of the person’s commitment to continued cooperation in relation to the conduct, including by way of providing the Fair Work Ombudsman with comprehensive information to enable the effectiveness of the person’s actions and approach to remedying the effects of the conduct to be assessed;
(d) the nature and gravity of the conduct;
(e) the circumstances in which the conduct occurred;
(f) the person’s history of compliance with this Act;
(g) any other matters prescribed by the regulations.’
The prospect of the benefit of such an agreement should incentivise any employer to seriously consider being proactive in approaching the Fair Work Ombudsman once on notice of a potential offence.
The Voluntary Small Business Wage Compliance Code
Section 327B of the FWLAA allows the Minister to declare a ‘Voluntary Small Business Wage Compliance Code’. That Compliance Code is yet to be released for wider comment. Section 327B(2) provides that if the Fair Work Ombudsman is satisfied that the small business employer has complied with the Compliance Code in relation to the failure to pay the required amount, there is a prohibition on the referral of the matter to the Director of Public Prosecutions or the Australian Federal Police for a possible offence.
A small business employer, by s23 of the FWA, at its simplest, is an employer with fewer than 15 employees at the relevant time. Casual employees are counted as part of the number of employees if their employment involves regular casual work. Employees of an associated entity of the small business employer are also counted.
The stick
As to penalty by s327A(5), for an individual there is a potential term of imprisonment of not more than 10 years and a fine. The fine is a potential 5,000 penalty units where the effective rate from 1 July 2024 per penalty unit is $330 given an amount of $1,650,000.
For a body corporate, the potential fine is 25,000 penalty units which is $8,250,000.
If the underpayment amount can be identified, that amount is subject to a multiplier of 3 and, if it is then greater than a penalty unit amount, the potential fine is for the greater amount.
The investigation process
The Fair Work Ombudsman has substantial powers to conduct investigations into the alleged breach and this includes interviewing persons and/or accessing documents.
Issues can arise as to self-incrimination. Should the employer be a body corporate then there is no protection against self-incrimination. This was determined by the High Court in the decision of Environment Protection Authority v Caltex Refining Co Pty Ltd [1].
In relation to a person, s713 of the FWA, in summary, obliges the person to make disclosures or to produce documents, notes and records and still enjoy protection against self-incrimination based on the production of those documents in compliance with the direction from the Ombudsman.
By s327C of the FWLAA, any prosecution must be commenced by the Director of Public Prosecutions or the Australian Federal Police.
The Director of Public Prosecutions will no doubt rely upon the Prosecution Guidelines which involve a consideration of whether there is a prima facie case as well as consideration of the prospects of conviction. Further, regard will be had to whether it is in the public interest to prosecute.
Any prosecution by s327C(2) may be commenced at any time within the six years after the commission of the offence.
Consideration needs to be given to the relationship between the timing of the offence proceedings and any possible civil proceedings and regard had to ss 552, 553 and 554 of the FWA.
By the time a prosecution is initiated, the body corporate or the individual subject to the prosecution should have had an opportunity to consider the issues including having made restitution to the relevant employees; reform of the work practices and procedures which led to the alleged underpayment; an assessment of the potential penalty on the impact of the operation of the employer’s business; and potential for adverse public opinion and reputational damage.
Civil proceedings
The creation of the offence does not detract from the capacity for civil proceedings to be based upon breaches of the FWA. This proposition is subject to a consideration of ss 552, 553 and 554 referred to above.
Such civil proceedings can extend beyond the employer by operation of s550 of the FWA to include a person who is involved in the contravention of a civil remedy provision taken to have contravened that provision.
However, for the offence proceedings discussed above, there is no comparable provision to s550. That said, there is a wide definition of Australian Government and a regime specifically designed to deal with Australian Governments as employers.
Conclusion
Employees who have been the victims of the offence of wage theft should be seeking redress including financial compensation well before any decision is made to prosecute and/or the outcome of any prosecution. It may be that the employer will defend the prosecution and yet pay financial compensation.
It may be that such payments will be part of a plea in mitigation.
Alternatively, it may be that the payments are made as a consequence of civil proceedings.
The focus of these amendments is not upon facilitating further compensation to the victims of the offence.
Whatever the motivations for the Parliament creating this offence, it certainly has significant potential for general and specific deterrence when an employer is considering its approach to payment obligations.
No doubt these amending provisions will be reviewed in greater detail as investigations are conducted and proceedings are initiated.
[1] [1993] HCA 74; 178 CLR 477.
