Jail cells waiting for Aussie CEOs who engage in wage theft

No more slaps on the wrist: new staunch wage theft laws are being applied to corporate executives, spelling jail time for any involved in direct and deliberate underpayments.

New statutory provisions set to come into place on 1 January 2025 mean Aussie chief executives could soon be sharing cells with hardened criminals if they are caught engaging in the deliberate underpayment of wages.

As part of amendments made to Australia’s national workplace legislation through the well-publicised Closing Loopholes legislation, corporate senior executives involved in intentionally underpaying employees could potentially face up to 10 years in prison.

These prison sentences match the maximum sentences for many serious crimes under various criminal laws, yet they’ve never been applicable to workplace conduct before.

In addition to the prison sentences, fines have been increased. In the event that a prison sentence isn’t imposed on the perpetrator, courts can impose a maximum fine of 25,000 penalty units (equivalent to $7.8 million) for wage theft convictions.

HR Leader reached out to Paul O’Halloran, partner and head of office at Dentons, about the law changes and how the new regulations may affect employers moving forward.

“The effect of these laws is that wage compliance will be elevated to the level of industrial accident prevention in workplaces and treated in the same way as avoiding serious injury and death of employees, which under health and safety laws can also attract prison sentences,” said O’Halloran.

“For too long, some employers have relegated award and wage compliance to HR teams – now – with the threat of prison sentences – award compliance will need to be monitored from the top down, and I believe that was the government’s policy rationale from the beginning.”

In the determination of guilt under the new laws, the Fair Work Ombudsman (FWO) will be able to refer cases to the Commonwealth Director of Public Prosecutions or the Australian Federal Police for criminal investigation. These cases, of course, can be applied to chief executives, payroll managers, or finance managers.

With another new compliance measure being presented to businesses, narratives around the over-compliance of Aussie companies have been circulating. Ben Thompson, Employment Hero chief executive, argued that these added compliance measures appear to “tighten the noose around the necks of SME owners”.

“Far from fostering an environment conducive to growth and innovation, the introduction of the ‘Closing Loopholes’ legislation appears to tighten the noose around the necks of SME owners, introducing penalties so severe they could easily dismantle the dreams of many Australian entrepreneurs,” Thompson said.

“With fines reaching millions of dollars, even minor breaches could spell disaster for businesses, particularly family-run establishments that might misinterpret the law.”

O’Halloran expressed understanding of employers feeling slumped by the continued regulation changes, but he believes that the repercussions of such actions should apply to both parties.

“I can understand that some employers will see this as over-regulation – but employees can be criminally fined for stealing money from their employers, so I think the policy objective was that it should be treated as a crime from both ends of the spectrum,” O’Halloran said.

In the context of these wage theft laws, safe harbour protections are in place for employers. From this, small businesses will be able to adhere to a deterrence measure referred to as the “voluntary small business wage compliance code”, which, if followed, can keep them out of any illegal contraventions.

Bigger companies can take the route of self-reporting any suspected wage theft to the FWO and enter cooperation agreements – which we’ve seen examples of in the past. Overall, safe harbours provide no protective measures against the penalties enforced by the FWO.

O’Halloran believes that as these laws creep closer to being in place, employers should seek the necessary legal advice to ensure they don’t have any nights locked in a jail cell.

“The upshot is that very careful legal analysis and legal advice is necessary to ensure proper wage compliance within all organisations from 1 January 2025, or else your CEO might be spending time in a jail cell with hardened criminals!” he said.