The Wage Theft Act

The Wage Theft Act 2020 (Vic) (Wage Theft Act) passed the Victorian Parliament on 16 June 2020 and commences operation on 1 July 2021.

The underpayment of wages and entitlements have been a particularly fraught issue in Australia over the past few years with a number. A range of large employers have self-reporting ed underpayments to the Fair Work Ombudsman. These instances of underpayments have coincided with a push to criminalise some types of deliberate underpayment. As a result, The phrase ‘wage theft’ has been introduced into the Australian industrial landscape.

Underpayment of wages and record-keeping obligations are issues that have historically been governed by industrial relations laws that, if not abided by, may lead to civil penalties being imposed on employers. The Wage Theft Act is different. It is the first piece of legislation in any jurisdiction in Australia that creates statutory criminal offences related to non-payment of employee entitlements or the falsification of employee records.

Under the Wage Theft Act there are three main criminal offences.

Offence 1 – Dishonestly withholding of employee entitlements

It is an offence under the Wage Theft Act for an employer or an officer of an employer to dishonestly withhold (or permit or authorise another person to withhold) the whole or part of an ‘employee entitlement’ owed by an employer to an employee.

Under the Wage Theft Act ‘employee entitlements’ include:

• wages or salary;
• allowance;
• gratuities; and
• the attribution or:
• annual leave;
• long service leave;
• meal breaks; and
• superannuation

in accordance with relevant laws, contracts or agreements that apply to the employees.

Offence 2 - Falsification of employee entitlement record to dishonestly obtain

It is an offence under the Wage Theft Act for an employer or an officer of an employer to falsify (or permit or authorise another person to falsify) a record of an employee entitlement with the view to dishonestly:

• obtaining a financial advantage for the employer or another person; or
• preventing the exposure of a financial advantage for an employer or another person.

Offence 3 – Failure to keep employee entitlement record

It is an offence under the Wage Theft Act for an employer or an officer of an employer to fail to keep (or permit or authorise another person to fail to keep) a record of an employee entitlement with the view to dishonestly:

• obtaining a financial advantage for the employer or another person; or
• preventing the exposure of financial advantage for an employer or another person.

Defences

The “dishonest” component of the offences is assessed objectively by the standards of a reasonable person. However, in assessing whether a withholding of employee entitlements is “dishonest” an employee’s consent is an irrelevant factor if the withholding, falsification of a record or failure to keep a record by the employer reduces the entitlement to less than the minimum amount required under relevant laws.

An employer will be able to defend a charge under the Wage Theft Act by proving that it took all reasonable steps to prevent the conduct occurring. Therefore, the need for a proper due diligence process to be in place to demonstrate reasonable steps is essential.

Who is liable?

An employer, officers of the employer (including key decision -makers) and individual partners in a partnership may be personally liable under the Wage Theft Act.

Penalties?

The penalties that are maybe imposed for committing an offence under the Wage Theft Act are steep and include:

• fines of up to $990,000 for corporations; and
• imprisonment for up to 10 years and/or fines of up to $198,000 for individuals.

Enforcement

The Wage Theft Act establishes the “Wage Inspectorate Victoria (Inspectorate)”. The Inspectorate has multiple functions under the Wage Theft Act to promote and inform people in relation to the Wage Theft Act. However, the Inspectorate’s functions include:

• the investigation of possible criminal offences under the Wage Theft Act;
• bringing criminal proceedings in relation to alleged offences under the Wage Theft Act; and
• to work with the Office of Public Prosecutions in relation to alleged offences under the Wage Theft Act.

What Next?

The commencement of the Wage Theft Act is about a year away. The Federal Government has already indicated it intends to introduce legislation that relates to the criminalisation of deliberate underpayment of wages and has criticised the Victorian Government for introducing its own legislation.

There are potential arguments that the Wage Theft Act is unconstitutional and because it is inconsistent with the Fair Work Act and there may be further arguments that the Wage Theft Act is unconstitutional if the Federal Government introduces its own legislation that criminalises certain forms of underpayments.

It is very much an uncertain state of affairs. However, it is more important than ever that businesses understand their obligations to employees under legislation, modern awards, enterprise agreements and employment contracts in order to prevent the prospect of the Wage Theft Act ever being potentially applicable to them.

Nicholas Kelly is a Senior Associate at Rigby Cooke Lawyers

Ph: (03) 9321 7839; E: nkelly@rigbycooke.com.au 

David McLaughlin is a Partner in Rigby Cooke Lawyers

Ph: (03) 9321 7838; E: dmclaughlin@rigbycooke.com.au 

Rigby Cooke Lawyers is a full-service Victorian commercial law firm providing specialist legal expertise, supported by in-depth industry knowledge, to public and private sector clients across Australia.

www.rigbycooke.com.au