New Fair Work Ombudsman prepared to seek criminal wage theft penalties if legislation changes

Australia’s new Fair Work Ombudsman says she is prepared to seek criminal wage theft penalties against dodgy employers, firing an early warning shot to businesses deliberately flouting the law.

The federal government is currently pushing to criminalise wage theft under the Fair Work Act, a move which would expose employers who intentionally withhold earnings from workers to new and hefty penalties.

Under the proposed legislation, penalties could extend up to ten years’ imprisonment, or fines of up to $7,825,000.

Civil remedy provisions against wage exploitation already exist, exposing employers to significant fines.

Separately, state jurisdictions like Victoria have established their own wage theft criminalisation penalties, exposing local businesses to harsh enforcement measures.

But the federal government argues making wage theft a criminal offense at the federal level will help stamp out the practice, which the McKell Institute estimates is costing Australian workers $850 million per year.

Legislation underpinning federal wage theft criminalisation is wrapped up in the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023, which the Senate is unlikely to vote on before Christmas.

However, new Fair Work Ombudsman Anna Booth says the wages watchdog is willing and able to enforce those rules, if and when they come into law.

“Certainly once the law has passed, if indeed it does, and there is a criminal liability, as long as the criminal standard of proof has been met, then criminal penalties could flow,” Booth told ABC’s AM on Friday morning.

Booth, who took on the role in September, said wage underpayment remains a persistent feature in the business landscape.

“Whenever inspectors go out they do find contraventions, but I think any underpayment is too much, and I think there are still large cohorts of workers who are afraid, and they of course are one of our priority areas as well, vulnerable workers,” she said.

“I think the two go hand in hand together. So where an employer chooses to preference their profit over paying a worker correctly, and the worker themselves fears losing their job, that’s a diabolical combination and is definitely something we are focused on.”

The push to criminalise wage theft on a federal level has been met with concern from employer groups, which fear well-meaning businesses can accidentally underpay staff as a result of Australia’s complex industrial relations framework.

To shield small businesses from criminal prosecution in case of wage underpayment, the legislation proposes a “safe harbour” provision, whereby small businesses could avoid the harshest punishments by owning up to genuine mistakes and following a yet-to-be-developed voluntary wage compliance code.

“Compliance with the voluntary code is intended to provide assurance to small business employers that they will not be referred for criminal prosecution for wage theft under the FW Act,” the legislation states.

However, the Council of Small Business Organisations Australia — which has previously backed wage theft criminalisation laws — opposes the Closing Loopholes bill and has disputed the value of its small business carve-outs.

“Small business seeks genuine reform that enhances productivity and opportunity, not broad impacting confusion about what they are and aren’t allowed to do,” COSBOA CEO Luke Achterstraat told members late last month.

“The small business ‘exemptions’ do little to assuage concerns about the overall complexity of the bill.”

Employee representatives have welcomed the proposed safeguards for small businesses, saying they provide a balance between enforcement and leniency for enterprises trying to do the right thing.

The “introduction of a small business wage compliance code which will help to ensure that honest mistakes by small business are not caught by the criminal liability provisions,” the United Workers Union said in a submission to the Senate committee investigating the Closing Loopholes bill.