Voluntary Small Business Wage Compliance Code
Employment law update: Special Edition:
Release of immunity code for employers against criminal wage theft charges from 1 January 2025
Workplace Law is ever-changing. Whether through decisions of the courts and commissions or changes to the many pieces of State and Federal legislation that regulates the relationship between Employee and Employer.
Immunity from ‘wage theft’ prosecution: Small Business Wage Compliance Code released.
The federal government recently released the eagerly awaited Voluntary Small Business Wage Compliance Code (Underpayment Code). It has been proposed to provide small business employers with protection from criminal wage theft prosecutions which became available under the Albanese government’s so called ‘closing loopholes’ reforms.
Unfortunately, the Underpayment Code is not so much a black and white ‘code.’ It lists numerous things employers can, and where the government will determine (really, in its discretion), whether the Underpayment Code has been complied with. The ‘not-so-codified-code’.
Context: New ‘wage theft’ laws to take effect 1 January 2025
The context in which the Underpayment Code has been released, is the new federal criminal ‘wage theft’ laws that commence 1 January 2025, courtesy of the recent Closing Loopholes amendments. From 1 January 2025, any employer who intentionally does not pay or provide employees their correct entitlements may be guilty of the criminal offence of wage theft, subject to penalties, underpayment claims, and imprisonment in serious circumstances.
Once the law takes effect in 2025, the FWO will investigate the criminal offence and refer employers who have intentionally underpaid their employees for prosecution, after having decided on a case-by-case basis whether a small business has complied with the Underpayment Code.
Companies prosecuted face penalties of three-times the amount of the underpayment, if a court can determine it, or $7.825 million, whichever is greater. Note that if the court can’t determine the underpayment, the maximum penalty is $7.825 million. But, it’s not just the Company at risk – individuals, such as managers and directors, can also be imprisoned for up to 10 years; be fined either three-times the amount of the underpayment, if the court can determine it, or up to $1.565 million, whichever is greater; or can be both fined and imprisoned. Significantly, the wage theft provisions can also backdate to apply to employers who have demonstrated a pattern of underpayment conduct which commenced before 1 January 2025.
Voluntary Small Business Wage Compliance Code – a code that is really not a code.
Unlike the Small Business Fair Dismissal Code (Dismissal Code) where if a small business employer complies with the Dismissal Code, a dismissed employee cannot bring an unfair dismissal claim, there is less certainty with the Underpayment Code. Rather, the employer need not tick off each and every item or relevant items under the Underpayment Code for the employer to avoid a criminal prosecution. Rather, they will ‘look at the overall picture and the business’ particular circumstances where an underpayment has occurred to determine whether the Code has been complied with’. Which means compliance is unlikely to be black and white, and there will be ‘grey areas’ or desertion as to whether or not the Underpayment Code minimum obligations have been met. Some might say that this is inconsistent with the understood purpose of the Underpayment Code – being to give small business employers a checklist to comply with to in turn gain immunity from a potential criminal prosecution in the event of an underpayment error.
Ultimately, the Underpayment Code sets out several steps that employers can take to show they have complied with its terms. Which really is attributed to the steps they have taken to understand and properly fulfil their obligations, and their efforts to keep up to date with changes to workplace laws, to comply with timesheet and pay slip obligations, to get external help when required, as well as to address underpayments as and when they occur.
We strongly recommend that employers seek dedicated employment law advice.
