Victorian wage theft laws
On 16 June 2020 the Victorian Parliament passed Australia’s first laws on wage theft, the Wage Theft Bill 2020, which creates a criminal offence for underpayment of employee wages and entitlements by employers.
The legislation provides that employers who “dishonestly” withhold an employee’s wages, superannuation or other employee entitlements (either wholly or in part) will be criminally liable. The test for whether an employer is dishonest is according “to the standards of a reasonable person”. This is an objective test and includes consideration to what a reasonable person would have known, or was reckless to, in the circumstances.
Employers who make honest mistakes or who exercise due diligence in paying wages and other employee entitlements will not be subject to the legislation.
A new statutory authority, the Wage Inspectorate Victoria will also be established to enforce, investigate and prosecute under these new laws. It will have extensive powers to enter premises to obtain information, seize evidence and execute search warrants.
Contraventions of these laws include fines of up to $991,320 for companies, $198,264 for individuals, and up to 10 years jail.
Further, a person who assists, encourages or directs the commission of the offence under this legislation is also taken to have committed the offence. For example, franchisors that assist, encourage or direct franchisees to dishonestly withhold employee entitlements could be found guilty of an offence.
The new laws will come into effect on 1 July 2021.
Record-keeping offences
The new legislation also provides for new record keeping criminal offences. This includes falsifying employee entitlement records, failing to keep records with an aim to gain a dishonest financial advantage, and failing to keep records to prevent exposure of a financial advantage obtained by the employer.
Examples of these offences are:
- where an officer asks payroll staff to alter the number of hours an employee has worked on their timesheet, with a view to dishonestly obtaining a financial advantage;
- where an employer alters an employee’s payslip to provide a misleading rate of pay, with a view to dishonestly obtaining a financial advantage; and
- where an employer pays the employee for work performed but does not keep a record of the hours of work performed or the amount paid to the employee, with a view to dishonestly obtaining a financial advantage.
Such conduct, if established, will also be a criminal offence holding the same penalties as outlined above.
What about the rest of Australia?
At this stage, Victoria is the only state or territory in Australia to implement wage theft legislation.
The Morrison Government has previously confirmed plans to introduce legislation imposing jail terms and significant fines for the worst cases of exploitation and wage underpayments at a federal level, which is now being considered through a working group as part of the recently announced IR review.
Until such time as further legislation is passed in other states and territories, the Fair Work Ombudsman will continue to regulate wage related issues at a federal level, however the FWO does not currently have the power to seek imprisonment for any substantiated underpayments or breaches of record keeping obligations.
What do employers need to do?
It is now more important than ever that employers ensure they are meeting their minimum obligations to employees, particularly in respect to payment of wages. Employers should ensure as a minimum that:
- employees are being paid correctly in line with the applicable modern award, enterprise agreement and/or employment contract (including overtime and penalty rates);
- employees are appropriately classified in line with the applicable modern award or enterprise agreement, and regularly review classification of roles;
- employee records are being maintained in accordance with requirements under the Fair Work Act 2009; and
- payroll and human resources have training on the application of workplace laws, modern awards and/or enterprise agreements.
HR Legal can provide advice and assistance to employers in respect to underpayment of wages and employee entitlements.
