Ensuring that employees are correctly paid will be a key focus for regulators in 2021

by | Dec 10, 2020 | Employment Law and Workplace Relations Blog

The Australian Government has introduced a Bill that will increase penalties for employer underpayments, create a criminal offence for wage-theft and make it easier for employees to recover wages not paid. The Minister for Industrial Relations – Christian Porter says the aim of the government is to encourage widespread compliance and fair competition between businesses.

The Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (the Bill) was introduced into Federal Parliament on 9 December 2020.

Amongst other things, the Bill seeks to “enhance the Fair Work Act compliance and enforcement framework to more effectively deter non-compliance with workplace laws and make it easier to recover wages when underpayment does occur”.[1]  Additionally, the Bill would introduce a new criminal offence for dishonest and systematic wage underpayments.  Civil penalties are also increased.

A new criminal underpayment offence

The Bill would introduce an offence of dishonestly and systematically underpaying one or more employees.  Dishonest means knowingly dishonest and systemic can be determined by a court considering any relevant factors, including:

  • the number of underpayments;
  • the period over which they occurred;
  • the number of employees affected;
  • whether the employer has failed to comply with record keeping requirements and payslip requirements; and
  • how the employer responded (if at all) to complaints made to them about underpayments.

The maximum penalties proposed for dishonestly and systematically underpaying an employee (or employees) are imprisonment for 4 years and fines up to $1,110,000 for individuals or fines up to $5,550,000 for a body corporate.

Increased civil penalties

The Bill would increase the civil penalties that may be imposed on employers that are not small businesses, in some cases from $66,600 to $99,900 or from $666,000 to $999,000 for serious contraventions.

As well as the civil penalty increases on companies – company directors, managers and others who might be involved in payroll or HR need to remember the continuing operation of section 550 of the Fair Work Act 2009 (Cth).  Section 550 says a person involved in a contravention  is taken to have committed the contravention – exposing them to civil penalties as well as the company.  Some ways a person may be involved in a contravention include aiding or being knowingly concerned in the contravention.

More employees can access the Federal Circuit Court small claims procedure for underpayments

The cap for small claims will be lifted from $20,000 to $50,000 and the Fair Work Commission (FWC) will be empowered to conciliate small claims referred to it by the Federal Circuit Court.  If parties agree, the FWC may also arbitrate small claims where conciliation has been unsuccessful.

Employers who make one-off mistakes, underpayments or miscalculations

Section 715 of the FWA currently allows the Fair Work Ombudsman to accept an employer’s enforceable undertaking instead of applying to a court for orders relating to contraventions.

The Bill would introduce specific criteria that permit the Fair Work Ombudsman to consider an employer’s candour, their willingness to cooperate and rectify a contravention and whether the contravention was the result of honest mistake or inadvertence – when considering whether to accept an undertaking or to bring a matter to court.

Key take-aways

  • Recent years have shown several high profile cases of employers underpaying their employees.
  • Some of these cases were system generated or genuine payroll mistakes. However, some involved dishonest conduct to falsify records or claw-back money paid to employees.
  • In 2021, if the Bill becomes law, similar cases may result in criminal prosecutions and at the very least larger fines than have applied previously.
  • With a simpler mechanism to apply for orders, it is also expected the number of small claims by employees may increase.
  • Compliance audits and improved governance procedures are practical ways that companies and individuals can identify, correct and self-report underpayments. These activities demonstrate best practice and will help manage employment, turnover and litigation risks.

If you would like to know more about employment compliance or ways in which Panetta McGrath Lawyers can help your business with its employment assurance activities, please contact our Employment and Workplace Relations team on (08) 9321 0522.

[1] Explanatory Memorandum, Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020.

Jenny Edinger

Jenny Edinger