Significant Changes to Workplace Laws from 1 January 2025

WAGE THEFT

As of 1 January 2025, intentional underpayment of wages is a criminal offence (“Wage Theft”). As discussed in our article in January 2024 (The Closing Loopholes And Other Reforms: The Many Changes To IR Laws That Will Impact Business In 2024 – Keypoint Law), the criminalisation of wage theft is a major change to workplace laws introduced by amendments to the Fair Work Act 2009 (Cth) (“Act”), passed in late 2023 under the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Cth) (“Closing Loopholes Act”).

The Offence

An employer can be an individual or a company.

Under the new section 327A(1) of the Act, an employer commits an offence if it engages in intentional conduct to failure to pay an amount (“Required Amount”) due to an employee in full on or before the day when the required amount is due for payment.

A required amount includes wages, allowances, superannuation, leave entitlements and salary sacrifice arrangements.

There are some exceptions. As stipulated in section 327A(2), these criminal offence provisions do not apply to:

• Employees in New South Wales, South Australia, Queensland, Tasmania and Victoria, who are employed by sole traders, partnerships, other unincorporated entities or non-trading corporations;
• Most Victorian state government employees; and
• Tasmanian local government employees, for the following specific types of underpayments: superannuation contributions, payment for taking long service leave, payment for taking paid leave by reason for being a victim of crime, or payment for taking paid leave for jury duty or emergency services duties.

Criminal Standard of Proof – Beyond Reasonable Doubt 

To be found guilty of wage theft, the prosecution will have to prove beyond a reasonable doubt that the employer intentionally engaged in the relevant conduct. For section 327A(1)(d), the prosecution will have to prove beyond a reasonable doubt that the employer intended that their conduct would result in a failure to pay the required amount to, on behalf of, or for the benefit of, the employee in full or on before the day when the required amount is due for payment.

Underpayment of required amounts which are caused by genuine mistakes, accidents or miscalculations will not be captured by these provisions or subject to criminal penalties; however, if an employer becomes aware of such mistake and fails to correct this mistake, to the effect that it continues to underpay employees, this may constitute a contravention of section 327A.

Only the Department of Public Prosecutions (“DPP”) or Australian Federal Police (“AFP”) are able to commence a prosecution of intentional wage theft under the Act, and must do so within 6 years of the contravention, pursuant to section 327C of the Act.

Penalties 

If an employer is found to have committed wage theft, the maximum penalties that may be imposed by the Court are as follows.

For companies

• Where the Court can determine the value of the underpayment, the maximum fine will be the greater of three times the amount of the underpayment, or AUD 8.25 million; or
• Where the Court cannot determine the value of the underpayment, the maximum fine is AUD 8.25 million.

• A maximum of 10 years’ imprisonment; and/or
• Where the Court can determine the underpayment, the maximum fine will be the greater of three times the amount of the underpayment, or AUD 1.65 million; or
• Where the Court cannot determine the value of the underpayment, the maximum fine is AUD 1.65 million.

Whilst the offence applies to intentional underpayments only came into effect on 1 January 2025, the Wage Theft provisions can apply to those which are part of a pattern of conduct which commenced before that date.

Self-Reporting

An employer can avoid potential criminal liability for underpayment issues by self-reporting to the Fair Work Ombudsman (“FWO”). The FWO is a federal agency which investigates matters relating to the workplace and enforces compliance with workplace laws and industrial instruments.

Upon self-reporting and if the employer cooperates fully with the FWO, the FWO may agree to enter into a written agreement called a “Cooperation Agreement” with an employer which covers the specific conduct to be backpaid, that may amount to Wage Theft. In such circumstances, the FWO cannot subsequently refer the conduct to the DPP or AFP for prosecution after it has entered into a Cooperation Agreement; however, a FWO inspector can still initiate or continue civil proceedings in relation to the conduct.

Compliance Notice

If an employee raises concerns about underpayments to the FWO, a Fair Work Inspector may conduct an investigation. If an employer does not cooperate with the Fair Work Inspector to rectify a breach, a Fair Work Inspector will be able to issue a compliance notice. Compliance notices issued to employers can require the employer to calculate the amount of underpayment owed to an employee (or group of employees) and pay the amount owed accordingly. If the employer does not comply with a compliance notice, the FWO will be able to commence civil legal proceedings in Court which can order the employer to comply, either fully or partly, with its terms, and a fine.

Voluntary Small Business Wage Compliance Code

If the FWO is satisfied that a small business (that is, an employer with less than 15 permanent employees) complied with the Voluntary Small Business Wage Compliance Code (“Code”) in relation to an underpayment, the FWO cannot refer a small business employer’s conduct to the DPP or AFP for possible criminal prosecution, or enter into a cooperation agreement with the employer that covers any conduct that resulted in the failure.

However, the FWO may still be able to take civil action against a small business employer in relation to the underpayment.

A small business employer will have complied with the Code if they did not intend to underpay their employees. The Code contains factors which may be relevant in the FWO’s consideration of whether a small business employer intentionally underpaid their employees, which includes any steps taken by the business to ensure that they are correctly paying their employees and keeping up to date with changes. These include minimum pay increases, any steps taken by the business after discovering the underpayment, such as rectifying the mistakes and immediately making back payments to employees, and any steps taken to ensure that there is no reoccurrence of the underpayment. A link to the Code can be accessed here.

Civil Penalties – Increased Maximum Penalties

In addition to the criminalisation of wage underpayments and associated criminal penalties, it is important to note separately that the Closing Loopholes Act introduced increased maximum civil penalties for wage underpayments by a non-small business employer. These changes also commenced on 1 January 2025.

The maximum penalties for a contravention will be the greater of three times the value of the underpayment or the penalty unit amount for the contravention.

In light of the serious consequences that employers may face if they under pay their employees, whether on purpose or by mistake, employers should be taking proactive steps now to ensure compliance. At a minimum, employers should conduct a wage audit to ensure they are not incurring an underpayment issue.

If an audit is of interest, we provide a comprehensive wage audit tool using a secure software enabled portal that is easy to access. Please contact us to learn more about this offering, which can help to safeguard your business.

CHANGES TO AWARDS FOR EMPLOYERS IN AGED CARE, NURSING AND SOCIAL AND DISABILITY SERVICES

Aged Care

As of 1 January 2025, changes made to classification and pay rates in several awards as a result of the Fair Work Commission’s (“FWC”) Aged Care Work Value Case are effective. The affected awards are:

• Aged Care Award 2010;
• Social, Community, Home Care and Disability Services Industry Award 2010 (“SCHADS Award”); and
• Nurses Award 2020.

• The inclusion of a new definition of ‘direct care’ employees to clarify their role;
• The inclusion of a new classification structure for direct care employees; and
• Updates to the indicative duties and qualifications for general and direct care employees in the classification schedule.

1. Home Care Employees – Disability Care; and
2. Home Care Employees – Aged Care.

• Direct care workers covered by the Aged Care Award, including nursing assistants who were covered by the Nurses Award;
• General care workers covered by the Aged Care Award; and
• Aged care employees covered by the SCHADS Award, including nursing assistants who were covered by the Nurses Award.

Direct care workers under the Aged Care Award, SCHADS Award and Nurses Award will receive a second pay increase from 1 October 2025.

1 January 2025 pay guides for the above awards are available on the FWO’s website.

CHANGES TO INTRODUCTORY LEVEL CLASSIFICATIONS AND MINIMUM PAY RATES IN AWARDS

Introductory level classifications

From 1 January 2025 (most affected awards) or 1 April 2025 (Horticulture Award and Pastoral Award), introductory or entry-level classifications in affected awards may only apply for a limited time. After the new maximum time limit for the introductory level classification (which varies between awards but is no longer than 6 months), employees must move up to the next classification level and corresponding pay grade.

New minimum pay rates for introductory level classifications

The FWO’s website provides a list of awards which are affected by new introductory level rules and/or new minimum pay rates which can be accessed at the following link:

Employees who have been employed at their award introductory level for more than the maximum period on 1 January 2025 or 1 April 2025 must progress to the next classification. As such, the minimum pay rates for these employees may increase on the first full pay period on or after 1 January 2025 (or 1 April 2025 for employees covered by the Horticulture Award and Pastoral Award).

Changes to entry-level classifications in awards – Fair Work Ombudsman

ENTERPRISE AGREEMENTS

For employees who work in the industries covered by the above list of awards (other than Horticulture Award and Pastoral Award), if they are covered by an enterprise agreement and paid introductory rates, they must continue to be paid in accordance with the new classification rate under the award that would otherwise cover them. This rule applies from 1 April 2025 for employees who work in the horticulture and pastoral industries.

KEY TAKEAWAYS

Wage Theft

The wage theft laws which are currently effective and apply to a pattern of conduct which commenced before 1 January 2025, may have serious implications for your business. Notwithstanding that criminal penalties are now applicable, there are also increased maximum civil penalties for wage underpayments by a non-small business employer. In this regard, we suggest employers take the following proactive steps:

1. Review employment contracts and other documentation to ensure remuneration provisions are clearly and properly articulated;
2. Review all record-keeping practices to ensure they are complaint and robust;
3. Review award classifications and pay rates for all employees;
4. Perform regular wage and superannuation payroll compliance audits to ensure there are no underpayment issues;
5. If there is any suspected underpayment, rectify the underpayment immediately and document all steps taken to rectify the underpayment and consider self-reporting to the FWO;
6. Small business employers should review and comply with the Voluntary Small Business Wage Compliance Code.

There are significant changes to the Aged Care Award, SCHADS Award and Nurses Award following the FWC’s Aged Care Work Value Case. We recommend employers take the following steps:

1. Review and consider the amendments in the Awards, including the new classification definitions, classification schedules and indicative duties and qualifications for general and direct care employees under the Aged Care Award;
2. Review the duties and qualifications of current employees who are covered by the affected Awards;
3. Consider if there are current employees who need to be re-classified under their Award and/or become covered by a different Award e.g. Nursing Assistants who were covered by the Nurses Award prior to 1 January 2025 and who perform aged care work in the aged care sector are now covered by either the Aged Care Award or the SCHADS Award;
4. Use the tables within the new classification schedules in the Aged Care Award and SCHADS Award to assist in identifying an employee’s new classification; and
5. Noting the minimum pay rate increases for eligible employees working in the aged care sector, ensure that the payroll is updated and the increase in pay is applied from their next pay run.

1. Review the list of affected awards at the FWO’s website: Changes to entry-level classifications in awards – Fair Work Ombudsman;
2. Consider if there are any employees covered by these awards and if they are currently working at an introductory or entry-level classification and/or for what period;
3. Consider if these employees have worked for longer than the maximum time limit for their introductory level classifications. If so, these employees must be progressed to the next classification and paid accordingly; and
4. For employers and employees who may be covered by an enterprise agreement and not an affected award, employers should identify the applicable award for these employees and ensure that the introductory rates in the enterprise agreement satisfies at least the minimum pay rates in the award.  If not, make the requisite changes and update payroll systems.

If you wish to discuss any aspect of this client alert, require specialist advice in relation to determining whether your business will be affected by these amendments, or assistance reviewing current employment practices or processes, please do not hesitate to contact us.

This alert is not intended to constitute, and should not be treated as, legal advice.