Wage theft bill heralds underpayment scrutiny

This article was current at the time of publication.

Employers with employees in Victoria are on notice after a Bill was passed making it a criminal offence to deliberately underpay staff entitlements, including superannuation, or to falsify employee payment records.

Following several high-profile cases of underpayment by large employers, the Parliament of Victoria passed the Wage Theft Act 2020 (Vic) (the Act) on 16 June 2020, which came into effect 1 July 2021. 

The legislation creates various criminal offences concerning employee entitlements and establishes Wage Inspectorate Victoria, which has wide investigative powers. 

Offences under the Act attract a penalty of up to $991,320 for companies, up to $198,264 for individuals and up to 10 years' imprisonment.

Although Victoria is the first state to introduce specific legislation on the issue, in September last year Queensland passed amendments to the Criminal Code and Other Legislation (Wage Theft) Amendment Bill 2020 (Qld), meaning employers there also face a penalty of up to 10 years' imprisonment for breaches.

In New South Wales, proposed changes contained in the Taxation Administration Amendment (Combating Wage Theft) Bill 2021 would introduce measures to allow Revenue NSW to collect payroll tax which is otherwise not collected due to wage theft. 

Penalties would also be increased from $10,000 to $110,000 per breach. 

At a federal level, proposed wage theft provisions were dropped at the last minute earlier this year from the Fair Work Amendment (Supporting Australia's Jobs and Economic Recovery) Bill 2021, leaving the onus on states and territories to police offences. 

Liability for employers

Michael Nicolazzo, Partner, Employment, Safety & People at law firm Maddocks says the Victorian legislation intends to prevent wage theft, not punish employers for honest mistakes in record keeping or underpayment.

“Because it is a criminal offence it requires the charge to be proven beyond a reasonable doubt – it is quite a high threshold,” Nicolazzo says. “It is not intended to target people who have made an honest mistake in calculations. It’s targeting deliberate and deceitful failure to pay.”

Accountants affected?

He says ultimate responsibility lies with employers, but accountants or bookkeepers could still be caught in a prosecution if they intentionally assist an employer to engage in wage theft or falsify records. They could potentially also have to disclose documents indicating discussions or instructions from an employer.

The explanatory memorandum and second reading speech provides that individuals who are not officers and act under the direction of the employer will not be liable (such as human resources or payroll employees), but third parties could be captured by complicity provisions. 

The second reading speech of the Act states: “This will enable third parties who are complicit in offending, including third parties who ‘intentionally assist’ in the offending, to be prosecuted.”

“An employer can’t seek to avoid responsibility by making their accountant or payroll provider responsible for the pay,” Nicolazzo explains. “[However] the court could still find that ultimately the employer has breached the Act and so has the accountant or payroll provider.”

How the act will be enforced

Wage Inspectorate Victoria is responsible for investigating offences and enforcing the new law. It has the power to compulsorily obtain information or evidence to determine whether an offence has been committed.

This means inspectors can enter premises with consent and/or with a warrant to search and seize relevant documents.

If necessary, Victoria Police officers may enter the premises specified in the warrant by force. Inspectors can also make recommendations to bodies such as Victoria Police and Australian Federal Police.

In addition to facing prosecution under the new Act, employers dealing with underpayment issues in their business may face concurrent investigation by the Fair Work Ombudsman and Wage Inspectorate Victoria.

“It is important for employers to keep in mind their obligations to pay employees the correct wages and entitlements under any modern awards, enterprise agreements or terms under an employment contract,” Nicolazzo says.

Jurisdiction goes beyond Victoria

The Act applies beyond Victoria to businesses based in other Australian states and territories or outside Australia, he adds. 

If an employee performs services within Victoria, or if the employer is based in Victoria (even if the employee is based in another state or outside Australia), or where the services were mainly performed in Victoria (even if the employer and employee are based elsewhere), the Act will apply.

“Employers who are based elsewhere but who operate some part of their business in Victoria should carefully consider whether the Act will apply to them,” Nicolazzo warns.