In recent years, greater focus has been placed on prosecuting businesses that underpay their staff the appropriate wages and conditions that apply under industrial law. This action, known as Wage Theft, is defined as employers breaching their legal obligations under relevant Awards, Enterprise Agreements, and other provisions required under the Federal Fair Work Act and other relevant State and Federal legislation (e.g. Superannuation, Long Service Leave etc.).

Given the complexity associated with the multitude of industrial legislation across Australia, many employers do not intentionally breach their legal requirements. However, employers have an obligation to seek advice if they don’t have the internal knowledge to pay their employees correctly. Employers who willingly choose to underpay their employees may face criminal sanctions for such actions.

What are the consequences of wage theft?

Across Australia, businesses ranging from large multinationals to small business owners have faced prosecution for underpaying their employees.

Under the Fair Work Act, individual employers found guilty of intentionally underpaying their employees could face up to 10 years in jail or fines reaching $1,565,000. Conversely, corporations could face fines of up to $7,825,000 or three times the underpaid amount. This legislative penalty builds on state-based legislation such as the Victorian Wage Theft Act 2020, which established penalties of up to $218,088 or up to 10 years in jail for individuals and a fine of up to $1,090,440 for companies.

Many Australian businesses have been prosecuted for underpayment of wages. Major Australian car dealer Eagers Automotive Limited (EAL) was recently required to pay $16 million as a back payment for wages and superannuation owed to numerous employees. Interestingly, for EAL, the financial exposure became evident when an audit was undertaken of employees previously employed by Automotive Holdings Group Limited (AHG). 

Whilst EAL had not committed the underpayment, the liability converted to EAL upon acquiring AHG.

In addition, significant payments have also impacted World Vision ($6 million) and restaurant chain Din Tai Fung's ($4 million). Further, prosecutions have been instigated against a range of small businesses, which includes a dietitian ($7,992), 21 restaurants, fast food and cafes on the Sunshine Coast ($223,107) and 38 food outlets in Perth ($769,475).

Other businesses, including builders, electrical services, baby retail businesses, passenger transport, and cleaning businesses, are currently facing prosecution.

Is your business at risk of facing prosecution for Wage Theft?

Many employers are unaware of the potential risks of underpaying their workers correct entitlement. Businesses are either unaware of their legal obligations or assume they are meeting them without adequately examining their arrangements. Further, many small businesses rely on their accountant's advice–many of whom may not have a sound knowledge of industrial law to provide sage advice.

Regardless, businesses are legally obligated to pay their staff correctly – and can face punishment for failing to do so.

To assist businesses in assessing the level of exposure in their organisation, consider the following questions to help identify if you are potentially at risk:

☐  Do you know what Award(s) apply to your employees?

☐  Do you have a copy of the Award and know its content?

☐  Do your employees work overtime/varying hours/weekends/public holidays?

☐  Are you aware of the relevant overtime/penalty/shift rates that apply under the Award?

☐  Have you accessed the most recent Award wage increase that applied on 1 July 2024?

☐  Do you keep appropriate employment (Time and Wage) records relating to your employees?

☐  Do you have appropriate employment contracts/policies and procedures for your staff?

Acclaimed Workforce can help to identify any potential underpayments in your business

Acclaimed Workforce’s Workplace Relations team can partner with your business to help identify a potential exposure. We offer a free 1-hour Underpayment Risk Assessment for your organisation to help identify potential exposure to an underpayment claim. This will include an initial assessment of the business's legal obligations as identified in the above dot points. This free assessment is part of a range of services the Acclaimed Workforce offers businesses across Australia, including employee engagement advice, workplace investigations, employment contracts, policies and procedures.

If you would like to discuss this further, please do not hesitate to contact Nick Wakeling, Manager of Workplace Relations, on 0466 517 798.